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Federal Court Orders Virginia Resident to Pay More Than $5 Million for Futures and Options Fraud

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— The Commodity Futures Trading Commission announced today that Judge John A. Gibney, Jr., of the U.S. District Court for the Eastern District of Virginia entered a Consent Order for Permanent Injunction, Restitution and Ancillary Equitable Relief against defendant Leonard J. Cipolla finding, among other things, that Cipolla fraudulently solicited individuals to place funds in a commodity pool to trade futures and options while misappropriating more than $5 million of the money he was given to trade. The order requires that Cipolla pay restitution of $5,102,283.51 and imposes permanent trading and registration bans.

The order resolves a CFTC action against Cipolla filed in the Eastern District of Virginia on September 19, 2019. [See CFTC Press Release No. 8020-19] Litigation against Cipolla’s company, Tate Street Trading, Inc., continues. 

Case Background

According to the order, and as Cipolla admitted, from June 2009 through April 2019, Cipolla fraudulently solicited and received approximately $7,096,303 from pool participants in connection with futures and options pooled trading. The order also found that Cipolla misappropriated more than $2.5 million for business expenses or personal use and made more than $3 million in Ponzi-like payments to pool participants.  

Despite having accepted approximately $7,096,303 from pool participants, the order found that Cipolla transferred only approximately $1,462,834 into Tate Street’s trading accounts. While Cipolla typically promised pool participants substantial returns, his actual trading between June 2009 and April 2019 was profitable in only two years and resulted in cumulative net losses of approximately $1,462,305. The order also found that Cipolla provided statements to pool participants that did not accurately reflect their trading results.

Parallel Criminal Action

In a separate, parallel criminal action, the U.S. Attorney for the Eastern District of Virginia previously announced that Cipolla pleaded guilty to mail fraud and acting as an unregistered commodity pool operator in connection with the scheme. On July 1, 2020, Cipolla was sentenced to 121 months in federal prison and ordered to pay restitution to victims. [See United States v. Leonard J. Cipolla, Case No. 3:19-cr-00126, ECF No. 40 (E.D. Va. Jul. 1, 2020)]

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the cooperation and assistance of the U.S. Attorney’s Office for the Eastern District of Virginia in this matter.

The Division of Enforcement staff members responsible for this case are James A. Garcia, Michael Loconte, James Deacon, Erica Bodin and Rick Glaser.

*****

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the Commodity Exchange Act.

This news item was originally published by the Commodity Futures Trading Commission (CFTC US). For more information, see the Source Link.

Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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