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The U.S. Commodity Futures Trading Commission announced
it had obtained a consent order imposing permanent trading and registration
bans against a California man and two companies along with civil monetary
penalties totalling nearly $7 million. Scott Bottolfson and Spirit
Investments, Inc. ("Spirit"), both of Encinitas, Calif., and Increase
Investments, Inc. ('Increase") of Reno, Nev. were originally named in
January 2011 in a CFTC enforcement action charging them with operating a $14
million commodity pool Ponzi scheme. The consent order, signed by United
States District Judge Anthony J. Battaglia, found Bottolfson and his two
companies in violation of several provisions of the Commodity Exchange Act.
From 2002 until August 2010, Bottolfson solicited
investors to trade commodity futures in two commodity pools, through his
companies, Increase and Spirit. Potential investors were provided with
false and/or misleading statements to induce their investment, including the
guaranty of a twenty percent return on their investment and that investments
were risk-free. In total, Bottolfson raised approximately $14 million
from thirty investors. Of that $14 million, less than $3 million was
placed into commodity pool trading accounts. $7 million was returned to
investors in the form of purported interest payments, and investors suffered
the loss of approximately $7 million in principal. Bottolfson also
misappropriated investor funds for his own use.
The enforcement action is the latest in a record-breaking
year for the CFTC, which recently stated that
it had filed 99 enforcement actions during Fiscal year 2011, a 74% increase
from the previous year. During that period, the CFTC obtained orders
imposing over $290 million in civil monetary penalties, and more than $160
million was ordered in restitution and disgorgement. Each of these sanctions
was also more than double the previous year's amount.
A copy of the Consent Order is here.
For more news and analysis of Ponzi schemes, visit Ponzitracker, a
blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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