Securities

CFTC Obtains Consent Order in $14 Million Forex Ponzi Scheme

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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