CFTC Uncovers $5.5 Million Ponzi Scheme

Feb 6 2009 | 1:17pm ET

Another day, another alleged Ponzi scheme uncovered by authorities.

This time, the U.S. Commodity Futures Trading Commission has filed an enforcement action against Charles Hays and his firm, Crossfire Trading, both of Rosemount, Minn., charging them with fraud in connection with a commodity pool Ponzi scheme.

The CFTC alleges that, from January 2006 to the present, Hays accepted more than $5.5 million from at least three individuals and a charitable foundation for trading stock index and crude oil futures. He convinced at least one investor to invest in Crossfire by telling them that it earned consistent profits trading commodity futures with no losing months.

However, the CFTC alleged that Crossfire never had an active commodity futures trading account. Hays, in an attempt to ease at least two investors’ suspicions as to what he was actually doing with their money, provided an account statement for the Crossfire pool to appear as if it was issued by a legitimate brokerage by using that brokerage’s letterhead. The statement indicated that Crossfire maintained a trading account at the brokerage with over $37 million.

Hays allegedly used $4 million of investor money to buy a yacht. “Hays ran his Ponzi scheme from his yacht, but was grounded when the tide turned as federal authorities exposed this egregious fraud,” said Stephen Obie, the CFTC’s acting director of enforcement.

The CFTC is requesting that the court issue orders of preliminary and permanent injunction against Hays, a return of alleged ill-gotten gains, repayments to defrauded investors, monetary penalties, and other relief.

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