Defendants In Ponzi Scheme To Defraud Investment Clubs To Pay $55 Million

WEST PALM BEACH, Fla. - (Mealey's) A federal judge in Florida on April 24 signed consent orders in which defendants agreed to pay nearly $55 million to end a suit in which the U.S. Commodity Futures Trading Commission (CFTC) alleged that they orchestrated a $28 million Ponzi scheme to defraud investment clubs (Commodity Futures Trading Commission v. Philip Milton, et al., No. 10-80738, S.D. Fla.).

U.S. Judge Daniel T.K. Hurley of the Southern District of Florida signed the supplemental consent orders. The first supplemental consent order requires Trade LLC managing member Philip Milton to pay $10.8 million in restitution and $7.7 million in fines. The second supplemental consent order requires Trade LLC to pay $11.4 million in restitution and $25 million in fines.

The CFTC filed its complaint on June 22, 2010, against Milton, Trade LLC and others. The CFTC said that from approximately May 2007 to July 2009, the defendants raised about $28 million from four investment clubs to trade securities on the clubs' behalf using Milton's supposedly proprietary software trading program. The CFTC said Milton claimed to trade in commodities futures, while defendants William Center and Gregory Center traded equity accounts. Despite taking in approximately $28 million from about 2,000 investors, the defendants placed only a fraction of the funds into trading accounts and kept about $10 million, the CFTC said.

Permanent Injunction

In June 2010, the District Court entered an ex parte statutory restraining order against Milton, the Centers and Trade LLC, as well as relief defendants BD LLC, CMJ Capital LLC, Center Richmond LLC and TWTT LLC. On April 15, 2011, the District Court entered a consent order of permanent injunction and civil monetary penalty against Milton. Wednesday's supplemental consent order filed by the CFTC and Milton stipulated the amounts Milton will pay.

"By consenting to the entry of this Supplemental Consent Order, [Milton] neither admits nor denies the allegations of the Complaint or the Findings of Fact and Conclusions of Law in this Supplemental Consent Order, except as to jurisdiction and venue, which he admits," the parties said in the supplemental consent order filed by the CFTC and Milton. The parties made a nearly identical statement in the second supplemental consent order.

The CFTC is represented by Danielle E. Karst, Jason A. Mahoney, John W. Dunfee and Paul G. Hayeck of the CFTC in Washington, D.C. Milton is represented by Lawrence U. Taube of the Law Offices of Lawrence U. Taube in West Palm Beach. Trade LLC is represented by Patrick Joseph Rengstl of Levine Kellogg Lehman Schneider & Grossman in Miami.

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