The Commodity Futures Trading Commission today announced the U.S. District Court for the District of Arizona entered a consent order on October 19, imposing monetary sanctions against Purvesh Mankad and his affiliated entities CTAX Series, LLC, a CFTC-registered commodity pool operator, and CTAX Partners, LLC, a CFTC-registered introducing broker.
The order resolves a CFTC action filed on October 8, 2021 and finds the defendants liable for fraudulent solicitation, misappropriation of pool participant funds, and making false statements to the National Futures Association (NFA) regarding the fraud. [See CFTC Press Release No. 8445-21.] The order requires the defendants to pay $1,631,072.29 in restitution to victims and to pay a $727,588.91 civil monetary penalty. The court also permanently prohibited the defendants from further violations of the Commodity Exchange Act (CEA), as charged, and imposed permanent registration and trading bans.
Case Background
The CFTC charged the defendants in connection with the CTAX Series 1, LLC commodity pool (CTAX pool). The complaint alleged, and the court found, that during the relevant period from approximately July 25, 2014 to March 22, 2019, Mankad and CTAX Series (1) represented to pool participants that only experienced commodity trading advisors (CTAs) would trade funds in the CTAX pool, when in reality Mankad, who was not a CTA and had limited, unsuccessful experience trading futures, engaged in much and eventually all trading in the CTAX pool; (2) misrepresented and omitted material facts regarding brokerage commissions that would be charged to the CTAX pool, when in fact Mankad and CTAX Partners misappropriated pool funds by extracting excessive commissions triggered by Mankad’s own unauthorized trading; (3) beginning in July 2018, recklessly traded the CTAX pool’s assets in a manner that resulted in a loss of approximately 89 percent of the CTAX pool’s assets, resulting in significant losses to pool participants; (4) concealed those losses from pool participants by intentionally delaying the provision of monthly account statements to pool participants; and (5) submitted false emails to the NFA, in connection with an NFA audit of CTAX Series and CTAX Partners, to make it appear that the defendants provided timely account statements to all pool participants. As a result of this conduct, pool participants lost more than $1.9 million.
The CFTC previously issued an order simultaneously filing and settling related charges against Paul Ohanian, an SEC-registered investment advisor based in Scottsdale, Arizona, and his advisory firm Scottsdale Wealth Planning, Inc., for intentionally or recklessly omitting material facts from communications with their clients who were pool participants contributing funds to the CTAX pool and for failing to register with the CFTC as CTAs. That order required Ohanian and Scottsdale Wealth to pay $338,000 in restitution and a $169,000 civil monetary penalty, among other things.
Today’s resolution against the defendants, combined with the order against Ohanian and Scottsdale Wealth, resulted in the CFTC securing orders requiring full restitution to be paid to victims.
The CFTC thanks the U.S. Securities and Exchange Commission and the NFA for their assistance in connection with this matter.
The Division of Enforcement staff members responsible for this case are Anthony Biagioli, Lauren Fulks, Erica Bodin, Tom Simek, Christopher Reed, and Charles Marvine.
* * * * * * *
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 unregistered, a customer should be wary of providing funds to that company. 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 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.
