The Commodity Futures Trading Commission has settled with Wisconsin-based introducing broker Prime Agricultural Investors, Inc. (Prime), and its Principal, Chad Henderson, after charges against them for improper allocation of customer trades.
Prime has agreed to pay a $100,000 civil monetary penalty and Henderson will disburse $300,000 to settle the matter on top of the $463,459.65 in restitution the defendants are required to pay.
The CFTC recognized the cooperation of Prime and Henderson during the division of enforcement’s investigation and ordered Prime to implement procedures and internal controls designed to prevent the improper allocation of trades.
Chad Henderson transferred profitable trades from his customers to himself
Chad Henderson, however, was permanently barred from trading customer funds in connection with transactions involving commodity interests.
The CFTC argued that Prime’s principal Chad Henderson transferred profitable futures transactions from his customers’ commodity interest accounts to his own account, from January 2018 to September 2019. In addition, he transferred his own unprofitable futures transactions to his customers’ accounts.
By allocating profits to himself that should have gone to his customers and avoided losses that he otherwise would have incurred, Chad Henderson and, by extension, Prime have violated the CEA.
Prime was found to have failed to adopt internal policies and procedures to effectively prevent this type of improper trading activity, including the lack of a policy requiring that someone, in addition to the individual broker, review trade transfer requests of the kind that Henderson routinely made.
The Winsonsin-based introducing broker also failed to diligently supervise Henderson in a manner sufficient to detect his repeated violations, the CFTC added.
CFTC charged FX scammer Troy Mason from Ztegrity
The CFTC has recently charged Ztegrity’s Troy Mason with a fraudulent scheme that netted nearly $460,000 from at least 411 retail investors and ordered him to pay that amount in restitution to customers and $300,000 in civil monetary penalties.
The FX scam was called “The Black Club” and “The Forex Savings Club” in which he made a series of materially false claims to lure investors interested in Forex trading. While he actually had no experience in running trading strategies, Mason claimed that he had profitably traded forex on behalf of himself and others. In addition, Mason did not disclose to clients that under his so-called “profit” sharing agreement he would charge fees, even if losses accumulated in their accounts.
In some cases, instead of using the investors’ monies in trading, the fraudster misappropriated the majority of the pool funds, which was largely spent on personal expenses. To create the illusion of stability, the defendants distributed false account statements to pool participants, telling them that Mason was a successful forex trader.
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