Feds Want Restitution for Commodities Fraud

MILWAUKEE (CN) - Q Wealth Management and its owner operated a commodity futures Ponzi scheme, the U.S. Commodity Futures Trading Commission says in federal court.

Eric Schmickle allegedly operated the scheme between May 2009 and April 2012

"Schmickle fraudulently solicited and accepted at least $5.3 million from at least 10 individuals for the purposes of operating a commodity pool and managing individual accounts to trade commodity futures contracts on their behalf," the complaint states. "Schmickle lied about his success as a trader, falsified account statements, invoices for commissions, and tax forms, and concealed the fact that he sustained trading losses of approximately $3 million. He misappropriated approximately $1.7 million of customers' funds by charging and receiving investment fees to which he was not entitled, paying purported returns to at least one customer with the funds of other customers, and using customer funds for his own business and personal purposes."

Q Wealth Management acted as an unregistered commodity trading adviser, while Schmickle managed accounts in the name of one client, the commission says.

Schmickle allegedly formed Aquinas SF, another unregistered entity that no longer exists, to obtain funds from at least nine pool participants. The commission says Schmickle traded U.S. Treasury note futures and E-mini S&P futures, among others.

After receiving actual account statements from a registered futures commission merchant who carried their trading accounts, Schmickle would send fake account statements to his clients, according to the complaint. He also allegedly sent fabricated tax forms that showed investment profits.

In one instance, Schmickle allegedly sent a 2011 1099 tax form to his client showing profits in that client's account of more than $4.3 million. The true tax form showed a $196,000 loss, the commission says.

Another time, Schmickle allegedly sent an account statement showing his client had a $3.8 million balance, when it was actually a loss of more than $37,000. The commission says Schmickle had an agreement with the merchant that he would receive 25 percent of any gains. He continually lied to his clients for his own personal benefit, the commission says. Schmickle pleaded guilty in July to defrauding investors, admitting that he misappropriated customer funds "to pay fictitious profits and for his own benefit," the complaint states.

The commission says Schmickle hid substantial trading losses when he "fabricated numerous documents, including account statements, invoices for his commissions, and Internal Revenue Service ("IRS") Form 1065s and 1099s."

Q Wealth Management is described in the complaint as a Missouri close corporation. Schmickle is 37 and originally from Bolivar, Mo., where he still owns a home and maintains bank accounts, the commission says.

The Bolivar Herald-Free Press reports that Q Wealth Management and Schmickle were accused earlier this year of defrauding Schmickle's father, his two brothers, and two Illinois attorneys, of more than $2 million through a fake investment company. The article says the lawsuit was filed May 16 in Polk County Circuit Court.

The commission seeks restitution and fines against Schmickle and Q Wealth Management for violation of the Commodity Exchange Act. It also seeks preliminary and permanent injunctions against their future involvement in commodity futures trading. David Chu is the commission's trial attorney and Ava Gould is the chief trial attorney.

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