United States Commodity Futures Trading Commission v. Driver
877 F. Supp. 2d 968
C.D. Cal.2012Background
- CFTC alleges Gordon Driver and his entities Axcess Automation LLC and Axcess Fund Management LLC operated a Ponzi scheme Feb 2006–May 2009, raising about $14.32 million from 100+ participants in the US and Canada to trade commodity futures; participants were falsely told profits while only two profitable months occurred; most funds were used for personal and business expenses rather than trading.
- Defendants allegedly issued misleading reports showing profits and concealed losses; Driver controlled bank and trading accounts and used investor funds for non-trading purposes, including payments to redeeming investors to conceal losses.
- Approximately $9.56 million of the solicited funds remained defrauded; about $77,337 frozen in accounts; roughly $9.56 million sought for restitution.
- Axcess Fund was registered as a CPO since July 2008 and Driver was an associated person; Axcess Automation and Driver acted as unregistered CPOs and commingled pool funds with non-pool property.
- Court granted CFTC’s summary judgment motions on multiple claims, ordered restitution of $9,562,488, permanent injunction, trading and registration bans, and civil monetary penalty of $31.8 million.
- Xi
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud and misappropriation under the Act (section 4b) | Driver made material misrepresentations and omissions with scienter. | Driver disputes the alleged misrepresentations or scienter. | GRANTED in favor of CFTC. |
| Fraud by a CPO under 4o(l)(A)-(B) | Axcess Fund’s and Driver’s actions violated 4b and 4o. | No separate liability beyond 4b. | GRANTED. |
| Failure to register as CPOs (section 4m(l)) | Driver and Axcess Automation operated as CPOs without proper registration. | Exemption or cured status not established. | GRANTED. |
| Commingling of pool funds (4.20(c)) | Pool funds commingled with non-pool property. | Not disputed. | GRANTED. |
| Failure to produce books and records (4n; 1.31; 4.23) | Axcess Fund failed timely production of emails and subscription agreements. | Production complied after court order; not timely. | GRANTED. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden shifting, absence of genuine issue)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (genuine dispute must be material and substantial)
- Baxter v. Palmigiano, 425 U.S. 308 (U.S. 1976) (adverse inference from Fifth Amendment invocation in civil cases)
- Sec. & Exch. Comm’n v. Colello, 139 F.3d 674 (9th Cir. 1998) (adverse inference and summary judgment standards in securities enforcement)