Rosenthal Collins settles CFTC charges

Discussion in 'Retail Brokers' started by tiddlywinks, Apr 13, 2012.

  1. Thu Apr 12, 2012 3:57pm EDT

    * RCG settles CFTC charges for supervisory failures

    * RCG to pay $2.5 million

    * CFTC says RCG failed to catch Ponzi scheme

    By Alexandra Alper

    WASHINGTON, April 12 (Reuters) - The Commodity Futures Trading Commission announced on Thursday a $2.5 million settlement with futures brokerage Rosenthal Collins Group (RCG) over its failure to detect a Ponzi scheme run by one of its customers.

    The CFTC said the brokerage failed to "diligently supervise" an account used for a multi-million-dollar commodity futures Ponzi scheme from 2006 to 2009.

    The scam was run by Enrique Villalba, who settled separate charges with the CFTC in 2011.

    In the settlement announced on Thursday, the CFTC alleged that RCG "failed to seek updated information or detect and report suspicious activity," despite significant changes in the amount of money flowing into the account and other warning signs of suspicious activity, according to a CFTC release.

    "Even if an FCM does not knowingly assist in a Ponzi scheme conducted by an account holder, an FCM cannot ignore questionable transactions that stand out as red flags of fraudulent conduct," David Meister, the Director of the CFTC's Division of Enforcement said in a press release, using the term for Futures Commission Merchant, or a futures brokerage.

    RCG declined to comment.

    In the earlier suit -- brought in March 2010 -- the CFTC alleged that Villalba operated a commodity futures Ponzi scheme that defrauded more than $37.5 million from more than 35 investors through his firm, Money Market Alternative, LP. The case settled in May, 2011.

    Villalba later pleaded guilty to wire fraud and was sentenced to more than 8 years in prison.

    Rosenthal Collins Group was one of the biggest winners in the aftermath of the October collapse of futures broker MF Global, which itself had a long record of disciplinary actions against it. As of the end of December RGC's customer funds stood at $237.8 million, a 17 percent increase from before the demise of its bigger rival.

    MF Global collapsed on October 31, after $6.3 billion in risky bets on European sovereign debt spooked investors and sent the futures brokerage spiraling into bankruptcy.

    Federal investigators are still searching for up to $1.6 billion in missing customer funds that may have inappropriately been used to cover the firm's debts.

    The order requires RCG to pay a $1.6 million civil monetary penalty and to return $921,260.90 to Villalba's victims - the amount earned by RCG and its guaranteed introducing broker on the MMA account.

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  2. ocean5


    Is there any single honest businessman left out there?!!!Show me just one!!!