The Commodity Futures Trading Commission today announced the U.S. District Court for the Northern District of Illinois entered an order of final judgment against Chicago-based Phillip Galles and the various Tyche entities he controlled: Tyche Asset Management LLC, Tyche Master Fund Ltd, Tyche Asset Trade LLC, Tyche Offshore Fund Ltd., Tyche Onshore Fund LP, Tyche PML Master Fund Ltd., Tyche PML Onshore Fund LP, Tyche Onshore Fund GP LLC, and Tyche Asset Trade LLC.
The order resolves the CFTC’s May 2023 action against Galles and the Tyche entities, finding them liable for fraudulently soliciting investments in a purported commodity pool, misappropriating pool participants’ funds; violating CFTC regulations governing the proper operation of commodity pools; and making false and misleading statements to the National Futures Association (NFA), a registered futures association, which is responsible for certain aspects of the regulation of futures and derivatives entities under the Commodity Exchange Act (CEA). [See CFTC Press Release No. 8700-23.]
The order requires Galles and the Tyche entities to pay $5,327,173 in restitution and imposes a $15,981,519 penalty. The order also imposes a permanent injunction against Galles and the Tyche entities, barring them from, among other actions, trading on CFTC-regulated markets and from engaging in conduct in violation of the CEA as alleged in the complaint.
Case Background
The order finds Galles falsely claimed to be a managed futures hedge-fund magnate with billions of dollars under management at Tyche Asset Management LLC and its affiliated entities. Galles claimed Tyche achieved extraordinary rates of return of more than 200% annually in recent years using sophisticated technology and strategies to trade commodity futures and options on CFTC-regulated markets.
However, Galles misappropriated participant funds and operated a Ponzi scheme. Galles and Tyche used very little participant funds to place trades, and instead Galles used the money to fund his lavish lifestyle and to promote his fabricated image as a hedge fund tycoon. The order finds Galles and the Tyche entities defrauded 65 people who suffered $5,327,173 in losses.
The order also finds Galles and Tyche lied to the NFA in filings certifying Tyche was not actively soliciting or accepting funds from customers. In April 2023, Galles repeated the same lies to NFA examiners when they asked him about Tyche’s operations.
The CFTC cautions that orders requiring repayment of funds to victims may not always result in the recovery of lost money because the wrongdoers may not have sufficient funds or assets.
The Division of Enforcement staff responsible for this matter are Carlin Metzger, Joseph Patrick, David Terrell, Scott Williamson, and Robert Howell.
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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 CFTC before committing 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 Whistleblower Office.
Whistleblowers may be 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.
