GREENSBORO, N.C. (CN) – Two men who run a North Carolina investment firm bilked investors of at least $3 million and spent a lot of the money on themselves, the Commodity Futures Trading Commission claims. The CFTC sued Rodney W. Whitney, Nicholas T. Cox and Integra Capital Management in Federal Court.
Whitney and Cox fleeced at least 16 customers, and “misappropriated participant funds, using them for personal expenses instead of commodity futures or forex trading, including travel, dining and entertainment, purchases of real estate and funding other business ventures,” the CFTC says.
The men ran the company out of High Point, N.C., from 2006 through 2009, according to the complaint. Whitney, of Thomasville, N.C., is a founder, manager and president of the company, and Cox, of Denton, N.C., was a founder and manager until he quit in January 2009, the CFTC says.
Whitney and Cox promised investors monthly returns of 3 percent to 5 percent, the commission claims. “This rate, however, was determined solely by Whitney’s and Cox’s review of the rates of return achieved by successful hedge funds published in a magazine article and was not based on Whitney’s, Cox’s, or Integra Capital’s past trading history.”
In fact, the commission said, none of the defendants’ accounts were profitable, but lost money in all but 3 of the 20 months they were active.
The firm closed its office in January 2009, because the partners could no longer afford their lease. From then until August 2009, the now-defunct firm operated out of Whitney’s home, the complaint states.
To keep the scheme going, Whitney and Cox provided commodity pool participants and potential investors with phony account statements and tax forms, the CFTC says. When investors realized something was amiss, Whitney blamed Cox for the losses, and asked for more time to make additional investments to recoup the losses, the complaint states.
The CFTC says the men spent at least $100,000 on real estate and other personal business expenses, $30,000 for travel, dining and entertainment, and $11,000 on automobile expenses.
The CFTC commission seeks a restraining order and injunction preventing destruction, removal or hiding of records, restitution, disgorgement of ill-gotten gains and civil penalties for multiple violations of the Commodity Exchange Act.