The U.S. Commodity Futures Trading Commission (CFTC) today filed an enforcement action against Arista LLC, a registered commodity pool operator (CPO) based in California.
The enforcement action alleges that Arista LLC principals Abdul Sultan Waliji and Reniero Francisco defrauded investors, made false statements in filings with the National Futures Association (NFA), and failed to register as a CPO during its first year of operating as one.
In particular, the CFTC complaint maintains that “from at least February 2010 through January 2012, the defendants carried out a fraudulent scheme to misappropriate millions of dollars from investors in commodity futures and options.”
Apparently, Waliji and Francisco collected $9.5 million from almost 40 investors, losing almost half of the money in fees and the other half in trading. “In order to perpetuate their scheme,” the CFTC statement says, “the defendants allegedly proved false quarterly statements to investors and filed false quarterly reports with the NFA.”
The report continues:
For example, the complaint alleges that the NFA, as a result of its examination, determined that Arista’s September 2011 pool quarterly report (PQR) had falsely reported a positive 99 percent rate of return in September 2011, when in reality Arista’s rate of return was negative 46.98 percent. NFA also determined that Arista’s PQR had falsely reported a net asset value (NAV) of $8,421,139 as of September 30, 2011, when in reality Arista’s NAV as of that date was approximately $523,000, according to the complaint.
Additionally, Waliji and Francisco will face a criminal complaint from the U.S. Attorney’s Office for the Southern District of New York. The complaint charges Waliji and Francisco with conspiracy, securities fraud, and wire fraud offenses. Waliji will be charged with commodities fraud as well. Currently, both Waliji and Francisco are under arrest in California by the Federal Bureau of Investigation.
The enforcement action comes amid a blitz of similar actions against fraudulent commodity pools since late November.
Read the CFTC’s statement here.