CFTC charges Integra Capital Management with USD3m Ponzi scheme

Date: Monday, October 4, 2010
Author: Emily Perryman, HedgeWeek

The US Commodity Futures Trading Commission has obtained an emergency federal court order freezing the assets of defendants Rodney W. Whitney, Nicholas T. Cox and Integra Capital Management of North Carolina.

The order, entered on 29 September by Judge Thomas D. Schroeder of the US District Court for the Middle District of North Carolina, also prohibits defendants from destroying books and records and grants CFTC staff access to such documents.

The court scheduled a hearing for 15 October on the CFTC’s motion for a preliminary injunction.

The order stems from a CFTC enforcement action charging the defendants with fraud and misappropriation in connection with operating a commodity pool Ponzi scheme involving both commodity futures and off-exchange foreign currency transactions.

The CFTC’s complaint alleges that, from at least September 2006 to August 2009, Whitney, Cox and Integra Capital fraudulently solicited and accepted at least USD3m from at least 16 customers to invest in a commodity pool and solicited at least five customers to trade off-exchange forex contracts.

Whitney and Cox falsely represented to these customers that Integra Capital consistently earned three to five per cent monthly returns and sustained virtually no losses in its futures and forex trading, according to the complaint. Whitney also allegedly distributed false account statements and false 1099 tax forms to Integra Capital’s customers, showing that their investments were profitable. Instead, the defendants’ trading accounts consistently lost money, according to the complaint.

Furthermore, the complaint charges that Whitney and Cox misappropriated customer funds to pay personal expenses, including dining, entertainment, travel and real estate purchases.

In its continuing litigation, the CFTC seeks preliminary and permanent injunctions against the defendants, a return of ill-gotten gains, restitution to defrauded customers and civil monetary penalties.