The Commodity Futures Trading Commission today announced it filed a complaint in the U.S. District Court for the Northern District of Illinois against Chicago-based Tyche Asset Management, LLC, a registered commodity pool operator, Phillip Galles, its principal and registered associated person, as well as eight other Tyche entities Galles controlled. The complaint charges Galles and the Tyche entities with defrauding more than 50 people throughout the U.S. in a Ponzi-like scheme that received more than $6 million between approximately October 2019 and the present.
The complaint charges Galles and the Tyche entities with a commodity pool fraud. The complaint also charges Galles and Tyche Asset Management LLC, with violating CFTC regulations governing the proper operation of commodity pools, and with making false and misleading statements to the National Futures Association (NFA), a registered futures association acting in furtherance of its official duties under the Commodity Exchange Act (CEA).
In its continuing litigation, the CFTC seeks restitution to defrauded pool participants, disgorgement of any ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations, as charged.
“As alleged, the defendants lied to participants and prospective participants with outlandish claims of experience, expertise and success, and also lied to regulators using CFTC registration to create an aura of legitimacy for a fraudulent scheme,” said Director of Enforcement Ian McGinley. “When the CFTC learned of the defendants’ alleged lies to the NFA in April 2023, we acted quickly to hold the defendants accountable. I commend the staff and our law enforcement partners for their dogged investigation and rapidly addressing misconduct that harms the public,” McGinley continued.
Case Background
The complaint alleges that Galles falsely promoted himself as a managed futures hedge-fund magnate with billions of dollars under management at Tyche Asset Management LLC and its affiliated entities. Galles claimed Tyche had achieved extraordinary rates of return of up to more than 200% annually in recent years, trading commodity futures and options on CFTC-regulated markets while employing sophisticated technology and strategies to generate these returns.
However, as further alleged in the complaint, Galles in fact misappropriated participant funds and operated a Ponzi scheme. Galles and Tyche used almost none of the funds received from participants to place any trades. Instead, Galles has used the money to fund his lavish lifestyle, and to promote his fabricated image of a hedge fund tycoon.
As alleged in the complaint, Galles and Tyche also lied to the NFA in filings certifying that it was not actively soliciting or accepting funds from customers, and Galles repeated the same lie to NFA examiners when they asked him in April 2023 directly about Tyche’s operations.
The CFTC appreciates the assistance of the NFA and the U.S. Attorney’s Office for the District of Jersey.
The Division of Enforcement staff responsible for this matter are Carlin Metzger, Joseph Patrick, David Terrell, Scott Williamson and Robert Howell.
CFTC’s Commodity Pool Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which provides information about a type of fraud involving individuals and firms, often unregistered, offering investments in commodity pools. The CFTC also strongly urges the public to verify a company’s registration with the Commission before investing funds. If an entity is unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected, paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
