copied from the cftc website
resource link: http://www.cftc.gov/PressRoom/PressReleases/pr6610-13
June 17, 2013
CFTC Charges North Carolina Resident James A. Shepherd and James A. Shepherd, Inc. with Commodity Pool Fraud
Defendants charged with fraudulently soliciting approximately $10 million from approximately 176 investors and misappropriating and commingling at least $4.45 million of the pool’s funds
Washington, DC —The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement Complaint against James A. Shepherd (Shepherd) and James A. Shepherd Inc., a registered Commodity Pool Operator, charging them with fraudulently soliciting, accepting, and pooling approximately $10 million from approximately 176 individuals to invest in a commodity pool called the Shepherd Major Play Option Fund LP (Pool) for the purpose of trading options on futures contracts. Shepherd allegedly misappropriated at least $4.45 million of the pool’s funds.
According to the CFTC’s Complaint, Shepherd fraudulently told pool participants and prospective pool participants that their funds would be invested in on-exchange options on commodity futures and that the Pool’s assets would not be commingled with the assets of any other entity. Rather than trade funds as represented, Defendants allegedly misappropriated a large portion of Pool funds and commingled those funds with funds unrelated to the Pool. Beginning in 2006, Shepherd allegedly transferred a large portion of Pool funds to: (i) Shepherd’s own bank account, for his own personal use and to repay other business obligations unrelated to the Pool; (ii) futures and options trading accounts maintained in Shepherd’s own name, which suffered significant trading losses; and (iii) a bank account in the name of a separate hedge fund operated by Shepherd, which he used to pay redemptions to those hedge fund investors.
The Complaint further alleges that Defendants concealed the fraud by distributing to pool participants periodic statements and annual certified financial statements that falsely represented the net asset value of the Pool. Defendants further concealed the fraud by forging bank statements and bank confirmations and making false statements to the Pool’s outside auditor and the NFA during the course of their respective audits, according to the complaint.
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act as charged.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of North Carolina, the Federal Bureau of Investigation and the National Futures Association.
CFTC Division of Enforcement staff members responsible for this case are Elizabeth C. Brennan, Patryk J. Chudy, W. Derek Shakabpa, Michael P. Geiser, Philip Rix, David Acevedo, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.
Last Updated: June 17, 2013