CFTC v. Growth Capital Management, LLC, et al., Case No. 3:10-CV-1473-B (D. Tex.) On July 9, 2012, the CFTC announced it obtained an order requiring Robert Mihailovich, Sr. and Growth Capital Management LLC (“GCM”) to pay approximately $9.3 million for fraudulently soliciting over $30 million from customers to trade commodity futures contracts and foreign currency (“Forex”) following entry of a default judgment.
The CFTC filed a complaint on July 27, 2010, against Mihailovich, Sr., GCM, and Robert Mihailovich, Jr. Mihailovich, Sr. was previously convicted and incarcerated on federal wire fraud charges and served 27 months. During his three-year supervised release, he fraudulently solicited and accepted more than $30 million from approximately 93 customers to open managed trading accounts. During the time of GCM’s initial registration, Mihailovich, Jr. failed to disclose his father’s involvement with GCM as a controlling principal.
Previously, the District Court entered an order of default judgment against GCM on March 15, 2011, and on November 22, 2011, the court entered an order of default judgment against Mihailovich, Sr., as a sanction for discovery violations. The June 26, 2012 order finds that during discovery Mihailovich, Sr. engaged in a pattern of willfulness and bad faith by failing to attend court-ordered hearings, failing to abide by court orders, failing to communicate with the CFTC, failing to appear or respond to his scheduled deposition, and failing to respond to written discovery requests. The June 26 order imposes sanctions against Mihailovich, Sr. and GCM requiring them to jointly and severally pay $3,475,112 in restitution and disgorge $389,006 in ill-gotten gains. They must also pay a civil monetary penalty of $5,440,000. In addition, the defendants are permanently enjoined from violating the anti-fraud provisions Commodity Exchange Act and CFTC regulations, as well as from engaging in certain commodity-related activities, including personal trading and applying for registration or claiming exemption from registration with the CFTC. Previously, the CFTC obtained a consent order against Mihailovich, Jr., that imposed a $40,000 civil monetary penalty and banned him from seeking registration with the CFTC for 10 years and from engaging in certain commodity-related activities for 5 years.