CFTC Busts Idahoan in Ponzi Complaint
BOISE (CN) - An Idaho man "cheated, defrauded and deceived" investors in a $12 million Ponzi scheme he ran through a commodity pool he owns, the Commodities Futures Trading Commission claims in Federal Court.
The CFTC says Michael Justin Hoopes, of Rexburg, ran his game through his Aspen Trading commodity pool, though "He has never been registered with the Commission in any capacity." The Commission claims Hoopes cheated his own cousin, whom he used to round up more investors for his scam.
From September 2007 until this week, Hoopes collected more than $11.6 million from investors, mostly Idahoans, allegedly to invest it in stock index commodity futures, the CFTC says.
Hoopes "commingled" at least $1.7 million of his customer's money with his own money, and lost more than $2 million on the investments he did make, all the while lying to his customers about where the money was going and how much he had left, the CFTC says.
He "promised" annual returns of 25 to 25 percent, the complaint adds.
"Hoopes provided false account statements to at least one pool participant showing that as of December 2009, Aspen Trading had over $2.2 million in a commodity futures trading account carried at Dorman Trading, LLC, a futures commission merchant registered with the Commodity Futures Trading Commission," the complaint states. "However, Aspen Trading has never had an account with Dorman, and Hoopes' two personal trading accounts with Dorman had a combined balance of only approximately $1,000 as of December 31, 2009. Hoopes also misappropriated pool participants' funds, using them for personal expenses and to pay purported profits to other pool participants in the manner of a Ponzi scheme."
The CFTC says the two Dorman accounts that Hoopes did have were in his name and his wife's. Hoopes deposited $2.3 million into one of the accounts, apparently the one in his name, which the complaint identifies as "account XXX16."
Hoopes was introduced to Dorman by Mirus Futures, an investment broker that is registered with the commission, and which is not a party to this complaint.
"Although Hoopes obtained at least $1,474,070 of these funds [the $2.3 million] from third party customers who invested with him for the purpose of trading commodity futures in a commodity pool, when Mirus' president questioned him as to the source of these funds in February 2008, Hoopes falsely claimed that his 'family sold some land, so it is my inheritance,'" according to the complaint.
When he did trade in commodity futures, it was a fiasco, the CFTC says: "Between October 2006 and May 31, 2010, Hoopes suffered net losses of over 90 percent trading futures at Dorman. Specifically, of the $2,299,397 Hoopes deposited into account XXX16, he suffered net losses of approximately $2,055,598 and withdrew approximately $243,102. At least $152,000 of the funds he withdrew were customer funds, and he used those funds for personal expenses, including paying his mortgage, car and credit card payments."
The SCTC also accuses Hoopes of solicitation fraud. It claims he used his cousin, Richie Webb, and Webb's brother-in-law, Stephen Crandall, a CPA, by telling them "that he was earning returns well in excess of 25 percent - 30 percent annually 'day trading,' and that he could offer Crandall a 25 percent return annually if Crandall decided to invest with him. Specifically, Hoopes told Crandall that customers who invested in 2008 would earn a 25 percent return on their investments for that year, customers who invested in 2009 would earn an annual return of 20 percent on their investments, and that Hoopes would take any profits over 25 percent as his commission. Hoopes later provided promissory notes to Crandall and Webb reflecting that their investments included an interest rate of 20 percent annually."
The CFTC says Crandall and Webb were not parties to Hoopes' fraud, but victims of it. They formed a company called SHR Investments, raised more than $2 million from 10 people, and turned it over to Hoopes, who "lost approximately $1,698,414 of the $2,068,103 that SHR invested in Aspen Trading," according to the complaint.
The CFTC seeks disgorgement, restitution, fines and an injunction.