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The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action charging Phillip Milton of Palm Beach Gardens, Fla., Gregory Center of McLean, Va., William Center of Richmond, Va., and their company, Trade LLC, based in Palm Spring Gardens, Fla., with operating a Ponzi scheme involving approximately $28 million in connection with the Trade commodity pool.
On June 22, 2010, the same day the CFTC complaint was filed under seal in the U.S. District Court for the Southern District of Florida, the court entered an order, also under seal, freezing defendants’ assets and preserving books and records. Both documents were unsealed by the court on July 2, 2010.
As alleged, from at least May 2007 through July 2009, Milton, Gregory Center and William Center fraudulently solicited approximately $28 million from at least 900 persons to participate in a commodity pool to trade commodity futures and options, among other things. In connection with operating the scheme, the complaint alleges that the defendants committed solicitation fraud and misappropriated pool funds. In addition, William Center is charged with issuing false pool account statements, and Trade, Milton and Gregory Center are charged with failing to register with the CFTC as commodity pool operators.
Specifically, to induce new pool investors, the defendants claimed to be successful commodity futures traders and touted the pool as having a profitable trading record. Despite taking in at least $28 million from investors, the defendants were not successful traders and placed only $15 million of investors’ funds in trading accounts at the pool, which consistently lost money during all but two months of its operation. The defendants also allegedly misappropriated at least $9.6 million for their personal use and to continue the scam. As is typical of a Ponzi scheme, the defendants paid principal and purported profits to existing pool participants using funds from new investors.
Four Florida corporations named as relief defendants
The CFTC complaint names as relief defendants BD LLC, CMJ Capital LLC, Center Richmond LLC and TWTT LLC, all Florida corporations owned by the individual defendants. The relief defendants allegedly received funds as a result of the defendants’ fraudulent conduct and have no legitimate entitlement to those funds.
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties and permanent injunctions against further trading and further violations of the federal commodities laws. The CFTC continues to attempt to account for and locate pool participant funds.
The Securities and Exchange Commission (SEC) simultaneously filed a related action against Trade, Milton and Gregory Center. The CFTC appreciates the SEC’s assistance.
The following CFTC Division of Enforcement staff members are responsible for this case: Jason Mahoney, George H. Malas, John W. Dunfee, Paul G. Hayeck and Joan M. Manley.
