The Commodity Futures Trading Commission today announced that the U.S. District Court for the Eastern District of New York entered a consent order for permanent injunction, monetary sanctions, and equitable relief against defendants Craig L. Clavin and his company Lighthouse Futures, Ltd., both of New York.
The court imposed $370,000 in monetary penalty and relief for defendants’ wrongdoing; including their fraudulent solicitation and misappropriation of participants’ money; sending false reports of profitable trading to participants to conceal their fraud; commingling of pool funds with non-pool funds; and failure to register with the CFTC as required. According to the order, the defendants admitted to all of the findings made in the order and allegations in the CFTC complaint.
The order requires that the defendants pay restitution of $345,000 and a civil monetary penalty of $25,000. The order also imposes permanent trading and registration bans and a permanent injunction prohibiting defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged. The order provides that the restitution obligation will be offset by any restitution paid in the related criminal case. The order resolves the CFTC’s enforcement case filed on June 10, 2020. [See CFTC Press Release No. 8180-20]
Case Background
According to the order, and as the defendants admitted, from at least 2015 through approximately May 2019, the defendants falsely represented that they were running a successful commodity pool, that the pool would participate in the commodities markets, and that the pool was exempt from registration with the CFTC. The order also found that the defendants made material misrepresentations to commodity pool participants, including falsely claiming that the pool generated returns of 10 to 14 percent from 2015 through 2019. According to the order, the defendants solicited at least $345,000 from pool participants, which they represented would be used for trading commodity futures. In fact, the defendants did no trading and used pool funds to pay Clavin’s personal expenses, including items such as travel, meals, the purchase of patio furniture, and debit card purchases, and to pay purported profits to some pool participants in the manner of a Ponzi scheme. The order also found that the defendants sent investors fraudulent pool reports and annual summary statements showing false trading profits.
The order also found that Lighthouse illegally operated as an unregistered commodity pool operator and that Clavin acted as an unregistered associated person of Lighthouse, which Lighthouse unlawfully allowed Clavin to do.
Parallel Criminal Action
On June 11, 2020, in a parallel, separate action, the Suffolk County District Attorney’s Office (New York) filed an indictment against Craig L. Clavin and his company Lighthouse Futures, Ltd. [New York v. Craig Clavin and Lighthouse Futures Ltd., Indictment No. 00217 – 2020]
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC appreciates the assistance of the Suffolk County District Attorney’s Office in New York.
The Division of Enforcement staff members responsible for this action are Mark A. Picard, Christopher Giglio, David Acevedo, Lenel Hickson, Jr., and Manal M. Sultan.
CFTC’s Commodity Pool Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories including the Commodity Pool Fraud Advisory, which warns customers 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 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), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
