CFTC Obtains $1.4 Million in Penalties in Ponzi Scheme

CFTC v. Midway Trading Company, LLC, et al., Case No. 11-23554-CIV-ROSENBAUN (S.D. Fl.).  On October 1, 2012, the CFTC announced that it obtained an order requiring Oscar Hernandez, Midway Trading Company, LLC and Conquest Investment Group, Inc. to pay a $1.4 million civil monetary penalty to settle CFTC charges that they operated a commodity pool Ponzi scheme and misappropriated customer funds for personal use.  The order also imposes permanent trading and registration bans against and permanently enjoins them from further violations of the Commodity Exchange Act.

The CFTC complaint, filed on September 30, 2011, charged that the defendants solicited about $3.8 million from pool participants by telling them that Hernandez had developed a risk-free trading system that would generate returns of from 20 percent to 60 percent.  Defendants misappropriated approximately $1 million of those funds to pay for personal expenses, such as mortgages and luxury cars.

In a related criminal proceeding in November 2011, Hernandez pleaded guilty to conspiracy to commit securities and commodities fraud.  He was sentenced to 57 months imprisonment and ordered to pay restitution.

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