BULLETIN: (UPDATED 5:35 P.M. EDT U.S.A.) The CFTC has gone to federal court in the Eastern District of Missouri, alleging that Grahame Rhodes of St. Louis was at the helm of a decade-long, commodity-pool Ponzi scheme aimed at family and friends.
Rhodes is charged with misappropriating the entire pool while “pretending to be a successful, but cautious, trader who earned annual rates ranging between 20 and 50 percent trading E-mini S&P futures contracts,” the CFTC said.
The scheme, which began in 2001, allegedly was aimed at family members and friends. About 12 investors plowed $2.1 million into the scheme, the CFTC said.
Rhodes “has never registered with the United States Commodity Futures Trading Commission . . . in any capacity,” the CFTC charged.
From the CFTC complaint (italics added):
Rhodes did not deposit any of the pool participant funds he collected during the Relevant Period into the non-existent pool or even a trading account. Instead, he misappropriated the funds and used them to pay for his personal expenses, including payments for luxury cars, credit card bills, private school tuition, and mortgage payments. Rhodes also used the funds he collected from the pool participants to pay fictitious profits to other pool participants in the manner of a Ponzi scheme.
Rhodes presided over a company known as Lincolnshire Trading LLC, the CFTC said.
And Rhodes even ripped of his then-mother-in-law, who was ill, the CFTC charged.
“During the Relevant Period, Rhodes and his then wife obtained power of attorney over his then mother-in-law’s financial affairs due to her deteriorating health,” the CFTC charged. “Rhodes has admitted that he facilitated the transfer of approximately $455,854 of his then mother-in-law’s money, including the proceeds of the sale of her home, to Lincolnshire or himself for the purported purpose of pooling her money with the pool participant funds for trading E-mini S&P 500 futures contracts. Rhodes never deposited these funds into a trading account and instead misappropriated them.”
A “forged trading statement” was part of his overall scam, the CFTC said.
As is typical in Ponzi schemes, Rhodes piled on the excuses when participants demanded their funds from the collapsing enterprise, the CFTC charged.
Rhodes tried to duck at least one investor by explaining he had created a “monster account” that would “produce more than enough to take care of the problem . . .” the CFTC charged.
But the “monster account was just a snow job, and Rhodes tried other excuses to mask his Ponzi, the CFTC charged.
“In a March 2012 e-mail to all pool participants, Rhodes claimed that he had lost 90% of a trading account when he inadvertently left a position open for two weeks, and that he was trying to obtain a statement that would prove the loss. In reality, no such loss had occurred, and consequently, no such statement ever existed,” the CFTC charged.
Read the CFTC complaint against Rhodes.
Read July news release by the office of U.S. Attorney Richard Callahan of an indictment against Rhodes for wire fraud stemming from an FBI and CFTC probe.