First Financial Trading

UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

______________________________________________
	)
In the Matter of:	)	CFTC Docket No. 00 - 35
	)
�� FIRST FINANCIAL TRADING, INC.	)
�� 725 North A1A	)
�� Suite E-104	)	COMPLAINT AND NOTICE OF HEARING
�� Jupiter, Florida 33458,	)	PURSUANT TO SECTIONS 6(c), 6(d), 8a(3)
	)	AND 8a(4) OF THE COMMODITY
�� SCOTT DEWITTE	)	EXCHANGE ACT, AS AMENDED
�� 200 Park Place	)
�� Jupiter, Florida 33458	)
	)
�� THOMAS GLOVER, II	)
�� 545 Ebbtide Drive	)
�� North Palm Beach, Florida 33408,	)
	)
- and -	)
	)
�� COREY JOHNSON	)
�� 111 Bonefish Circle	)
�� Jupiter, Florida 33477,	)
	)
Respondents.	)
______________________________________________	)

The Commodity Futures Trading Commission ("Commission") has received information from its staff which tends to show, and the Commission's Division of Enforcement ("Division") alleges that:

I. SUMMARY

1. Since July 1999, First Financial Trading, Inc. ("First Financial"), Thomas Glover ("Glover") and Scott DeWitte ("DeWitte") have fraudulently solicited customers to open accounts to trade options on commodity futures contracts ("commodity options") by knowingly misrepresenting, and failing to disclose, material facts concerning, among other things, (i) the likelihood that a customer would realize large profits from commodity options trading; (ii) the risk involved in trading commodity options; and (iii) the performance record of First Financial customers. Respondents Glover and DeWitte, in addition to fraudulently soliciting customers to trade commodity options at First Financial, fraudulently solicited customers to trade commodity options at other introducing brokers ("IBs") where they were previously employed, including, but not limited to, LMB Trading Group, Inc. ("LMB") and American Financial Group Services Incorporated ("American Financial"), by knowingly misrepresenting, and failing to disclose, material facts.

II. RESPONDENTS

2. First Financial Trading Inc., is a Florida corporation with its principal office located at 725 North A1A, Suite E-104, Jupiter, Florida 33458. First Financial was registered with the Commission as an independent and guaranteed introducing broker of Iowa Grain Company from October 1998 to November 1999. Since December 1999, First Financial has been guaranteed by National Commodities Corporation.

3. Thomas Glover, II, who resides at 545 Ebbtide Drive, North Palm Beach, Florida 33408, was registered as an AP of LMB from October 1997 to May 1999, and an AP of First Financial from September 1999 to July 2000.

4. Scott DeWitte, who resides at 200 Park Place, Jupiter, Florida 33458, was registered as an AP of LMB from October 1997 to August 1998, and from September 1998 to September 1999, as an AP of American Financial. DeWitte has been an AP at First Financial since May 1999 and a principal since February 2000.

5. Corey Johnson, who resides at 111 Bonefish Circle, Jupiter, Florida 33477, has been an AP at First Financial since October 1998, and was a principal from October 1998 to June 2000.

III. FACTS

FIRST FINANCIAL'S FRAUDULENT MISREPRESENTATIONS AND OMISSIONS

6. In October 1998, First Financial registered with the Commission as an IB; however, First Financial did not begin to solicit customers until July 1999. From July 1999 to July 2000, First Financial's staff consisted primarily of three individuals, Johnson, Glover and DeWitte.

7. At First Financial, Johnson exercised day to day authority of First Financial's operations, and performed all managerial and supervisory duties. For example, Johnson set the salaries, commissions, and bonuses for First Financial APs, and had final authority over hiring, firing, and disciplinary decisions. In addition, Johnson handled First Financial's customer complaints.

8. In May 2000, Johnson settled an action brought against him by the National Futures Association's Business Conduct Committee. In that action, the Complaint alleged, among other things, that Johnson, while an AP with American Financial, had made deceptive and misleading sales solicitations to customers which downplayed the risks of, and exaggerated the profits of, commodity futures and options trading, in violation of NFA Compliance Rules 2-2(a) and 2-29(a)(1). As part of the settlement, Johnson agreed to pay a fine of $10,000, and agreed that he and any firm of which he is a principal shall comply with the National Futures Association's Telemarketing Requirements for a period of one year, which requires, among other things, that all customer telephone conversations must be tape-recorded. Subsequent to the settlement, Johnson stepped down as principal of First Financial and transferred 91% of the ownership to his fianc�.

9. Since approximately July 1999, First Financial, through its APs, including Glover, DeWitte, and Johnson, solicited members of the general public to open accounts to trade commodity options.

A. Misrepresentations that Exaggerated the Likelihood of Profit

10. During the course of telephone sales solicitations, First Financial, Glover, and DeWitte misrepresented the likelihood of customers profiting from the purchase of commodity options.

11. Glover made misrepresentations to First Financial customers concerning the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following:

(i) that the purchase of commodity options from Glover was a "sure thing," or words to that effect;

(ii) that the customer could easily double his investment, or words to that effect;

(iii) that the customer could make $10,000 or $20,000 a month with very little risk, or words to that effect; and

(iv) that there was the potential for the customer to quit his job in two months based on his trading profits, or words to that effect.

12. DeWitte made misrepresentations to First Financial customers concerning the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following:

(i) that the customer was guaranteed to make money, or words to that effect;

(ii) that the customer would get rich from investing with DeWitte, or words to the effect; and

(iii) that the customer could make a 200% to 300% profit on his investment, or words to that effect.

13. Johnson made misrepresentations to one or more First Financial customers concerning the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following:

(i) that the customer could double his investment within months, or words to that effect;

(ii) that the customer could double his investment in one year, or words to that effect; and

(iii) that the customer would eventually have 150% gain or make a substantial profit, or words to that effect.

B. Misrepresentations and Omissions that Minimized the Risk of Loss

14. During the course of telephone sales solicitations, First Financial, Glover and DeWitte, routinely failed to disclose adequately the risk of loss inherent in the purchase of commodity options. Occasional references to risk were nullified by the First Financial's high-pressure sales tactics and by its misrepresentations and omissions which falsely conveyed that while losses on commodity options were theoretically possible, purchasing commodity options with First Financial was virtually risk free.

15. Glover made representations to First Financial customers, including, but not limited to, the following:

(i) that Glover's plan to make money for the customer was "virtually foolproof," or words to that effect;

(ii) that the money would be put in a safe investment, or words to that effect;

(iii) that the customer would make money with little to no risk, or words to that effect;

(iv) that the purchase of commodity options was "fairly risk-free," or words to that effect.

16. DeWitte made misrepresentations to First Financial customers, including, but not limited to, the following:

(i) that there was very little risk involved in trading commodity options, or words to that effect; and

(ii) that the customer could lose money, but DeWitte did not think that was going to happen, or words to that effect.

17. Johnson made misrepresentations to one or more First Financial customers, including, but not limited to, the following:

(i) that trading with Johnson would not be risky at all, or words to that effect;

(ii) that conservative investments would still yield returns of 60% to 70%, or words to that effect; and

(iii) that while a customer might suffer minor losses, eventually they would have a large gain and make a substantial profit overall, or words to that effect.

C. Misrepresentations that Overstated Performance Record

18. During the course of telephone sales solicitations, First Financial, Glover and DeWitte misrepresented and overstated its performance record to customers.

19. Glover made misrepresentations and overstatements about his performance record to First Financial customers, including, but no limited to, the following:

(i) that all his customers made money, or words to that effect;

(ii) that his customers had an excellent success rate, or words to that effect; and

(iii) that the firm's clients were making a lot of money, or words to that effect.

20. DeWitte made misrepresentations and overstatements about his performance record to First Financial customers, including, but no limited to, the following:

(i) that he had a good track record, or words to the effect; and

(ii) that he had several other clients who were making money on the markets, or words to that effect.

21. Moreover, Johnson made misrepresentations and overstatements about his performance record to First Financial customers, including, but no limited to, the following:

(i) that he was doing well for all his customers, or words to that effect; and

(ii) that he had annual returns of 200% in 1998 and 1999, or words to that effect.

22. First Financial customers entered into commodity option trades which seldom, if ever, earned the magnitude of profits represented. Most First Financial customers lost money on their accounts as a whole. From July 1999 to May 2000, First Financial APs solicited and opened 63 customer accounts. Over ninety-eight percent (98%) of these accounts suffered net losses, and only one customer account earned a profit. Total profits in First Financial's single profitable account for this time period was approximately $53, while total net losses in its unprofitable accounts exceeded $540,000.

23. From July 1999 through May 2000, Glover solicited and opened approximately 27 customer accounts at First Financial. All 27 of these accounts suffered net losses totaling approximately $248,000.

24. From July 1999 through May 2000, DeWitte solicited and opened approximately 18 customer accounts at First Financial. Over ninety-four percent (94%) of these accounts suffered net losses, and only one customer account earned a profit. Total profits in DeWitte's single profitable account for this time period was approximately $53, while total net losses in his unprofitable accounts exceeded $138,000.

25. From July 1999 through May 2000, Johnson solicited and opened approximately 15 customer accounts at First Financial. All 15 of these accounts suffered net losses totaling approximately $108,000.

GLOVER'S FRAUDULENT MISREPRESENTATIONS AND OMISSIONS AT LMB

26. Glover, during the course of his telephone sales solicitations while at LMB, misrepresented the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following:

(i) that the customer was being offered a "bulletproof investment," or words to that effect;

(ii) that the customer could make big earnings and large profits, or words to that effect;

(iii) that the customer could make $90,000 with little to no risk to his investment, or words to that effect; and

(iv) that the customer could see a profit of six digits and experience a "change of lifestyle," or words to that effect.

27. Glover, during the course of his telephone sales solicitations at LMB, routinely failed to disclose adequately the risk of loss inherent in the purchase of commodity options. Occasional references to risk were nullified by Glover's high-pressure sales tactics and by his misrepresentations and omissions which falsely conveyed that while losses on commodity options were theoretically possible, purchasing commodity options with Glover was virtually risk free. Such misrepresentations and omissions included, but were not limited to, the following:

(i) that the potential rewards of trading far outweighed the risks, or words to that effect; and

(ii) that stop losses would be used to minimize the risk of losing money, or words to that effect.

28. Glover, during the course of his telephone sales solicitations while at LMB, misrepresented and overstated his performance record to customers, including, but not limited to the following:

(i) that his customers had a tremendous track record, or words to that effect;

(ii) that he makes money for all his clients, or words to that effect; and

(iii) that LMB had customers doing well in the markets that Glover recommended, or words to that effect.

29. Glover's customers at LMB entered into commodity option trades which seldom, if ever, earned the magnitude of profits represented. Most of Glover's customers lost money on their accounts as a whole.

30. Glover solicited and opened approximately 60 customer accounts at LMB. Over ninety-six percent (96%) of these accounts suffered net losses, and only one customer account earned a profit. Total profits in Glover's single profitable account at LMB were approximately $225, while total net losses in his unprofitable accounts exceeded $442,000.

DEWITTE'S FRAUDULENT MISREPRESENTATIONS AND OMISSIONS AT LMB AND AMERICAN FINANCIAL

31. DeWitte, during the course of his telephone sales solicitations while at his two immediately previous IBs, LMB and American Financial ("previous IBs"), misrepresented the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following:

(i) that the customer could make big money, or words to that effect; and

(ii) that the customer had a chance of a lifetime to make money, or words to that effect.

32. DeWitte, during the course of his telephone sales solicitations at previous IBs, routinely failed to disclose adequately the risk of loss inherent in the purchase of commodity options. Occasional references to risk were nullified by DeWitte's high-pressure sales tactics and by his misrepresentations and omissions which falsely conveyed that while losses on commodity options were theoretically possible, purchasing commodity options with DeWitte was virtually risk free.

33. DeWitte, during the course of his telephone sales solicitations while at previous IBs, misrepresented and overstated his performance record to customers, including, but not limited to the following:

(i) that he had made a lot of money for other clients, or words to that effect; and

(ii) that all of his other clients were doing well, or words to that effect.

34. DeWitte's customers at LMB entered into commodity option trades which seldom, if ever, earned the magnitude of profits represented. Most of DeWitte's customers lost money on their accounts as a whole.

35. DeWitte solicited and opened approximately 23 customer accounts at LMB. All of these accounts suffered net losses. Total net losses in DeWitte's unprofitable accounts exceeded $213,000.

IV.

VIOLATIONS OF THE COMMODITY EXCHANGE ACT ("ACT") AND COMMISSION REGULATIONS ("REGULATIONS")

COUNT ONE

VIOLATIONS OF SECTION 4c(b) OF THE ACT, AS AMENDED, 7 U.S.C. � 6c(b)(1994),
AND SECTION 33.10 OF THE REGULATIONS, 17 C.F.R. � 33.10 (2000) BY
RESPONDENT FIRST FINANCIAL: FRAUD BY MISREPRESENTATION AND OMISSION OF
MATERIAL FACTS IN CONNECTION WITH THE SOLICITATION AND MAINTENANCE OF
COMMODITY OPTION TRANSACTIONS

36. Paragraphs 1 through 35 above are re-alleged and incorporated by reference.

37. First Financial knew that the representations in their telephone sales solicitations set forth in paragraphs 6 through 25 were false, deceptive, or misleading, or had no reason to believe that they were true, and knew that the telephone sales solicitations failed to disclose material facts to customers.

38. In or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of commodity option transactions, First Financial cheated, defrauded, or deceived, or attempted to cheat, defraud, or deceive, other persons by making false, deceptive, or misleading representations of material facts and by failing to disclose material facts, including those set forth in paragraphs 6 through 25, in violation of Section 4c(b) of the Act and Section 33.10 of the Regulations.

39. The foregoing acts, omissions and failures of Glover, DeWitte and other First Financial APs occurred within the scope of each such person's employment with First Financial, and First Financial is therefore liable for them. See Section 2(a)(1)(A)(iii) of the Act.

40. Johnson, directly or indirectly, controlled First Financial, and did not act in good faith, or knowingly induced, directly or indirectly, the acts constituting violations of Section 4c(b) of the Act and Section 33.10 of the Commission's Regulations. Johnson is therefore liable for these violations by operation of Section 13(b) of the Act.

41. Each fraudulent misrepresentation or omission, and willful deception during the relevant time period, including but not limited to, those specifically identified and incorporated by reference herein, is alleged as a separate and distinct violation of Section 4c(b) of the Act and Commission Regulation 33.10.

COUNT TWO

VIOLATIONS OF SECTION 4c(b) OF THE ACT, AS AMENDED, 7 U.S.C. � 6c(b)(1994),
AND SECTION 33.10 OF THE REGULATIONS, 17 C.F.R. � 33.10 (2000) BY
RESPONDENT GLOVER: FRAUD BY MISREPRESENTATION AND OMISSION OF MATERIAL
FACTS IN CONNECTION WITH THE SOLICITATION AND MAINTENANCE OF COMMODITY
OPTION TRANSACTIONS

42. Paragraphs 1 through 41 above are re-alleged and incorporated by reference.

43. Glover knew that the representations in his telephone sales solicitations while at LMB and First Financial specifically set forth in paragraphs 11, 15, 19, 23 and 26 through 28 were false, deceptive, or misleading, or had no reason to believe that they were true, and knew that the telephone sales solicitations failed to disclose material facts to customers, as set forth in paragraphs 29 and 30.

44. In or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of commodity option transactions, Glover cheated, defrauded, or deceived, or attempted to cheat, defraud, or deceive, other persons by making false, deceptive, or misleading representations of material facts and by failing to disclose material facts, including those set forth in paragraphs 11, 15, 19, 23 and 26 through 28, in violation of Section 4c(b) of the Act and Section 33.10 of the Regulations.

45. Each fraudulent misrepresentation or omission, and willful deception during the relevant time period, including but not limited to, those specifically identified and incorporated by reference herein, is alleged as a separate and distinct violation of Section 4c(b) of the Act and Commission Regulation 33.10.

COUNT THREE

VIOLATIONS OF SECTION 4c(b) OF THE ACT, AS AMENDED, 7 U.S.C. � 6c(b)(1994),
AND SECTION 33.10 OF THE REGULATIONS, 17 C.F.R. � 33.10 (2000) BY
RESPONDENT DEWITTE: FRAUD BY MISREPRESENTATION AND OMISSION OF MATERIAL
FACTS IN CONNECTION WITH THE SOLICITATION AND MAINTENANCE OF
COMMODITY OPTION TRANSACTIONS

46. Paragraphs 1 through 45 above are re-alleged and incorporated by reference.

47. DeWitte knew that the representations in his telephone sales solicitations while at First Financial, LMB, and previous IBs, specifically set forth in paragraphs 12, 16, 20, 24 and 31 through 33 were false, deceptive, or misleading, or had no reason to believe that they were true, and knew that the telephone sales solicitations failed to disclose material facts to customers, as set forth in paragraphs 34 and 35.

48. In or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of commodity option transactions, DeWitte cheated, defrauded, or deceived, or attempted to cheat, defraud, or deceive, other persons by making false, deceptive, or misleading representations of material facts and by failing to disclose material facts, including those set forth in paragraphs 12, 16, 20, 24 and 31 through 33, in violation of Section 4c(b) of the Act and Section 33.10 of the Regulations.

49. Each fraudulent misrepresentation or omission, and willful deception during the relevant time period, including but not limited to, those specifically identified and incorporated by reference herein, is alleged as a separate and distinct violation of Section 4c(b) of the Act and Commission Regulation 33.10.

COUNT FOUR

VIOLATION OF SECTION 166.3 OF THE REGULATIONS, 17 C.F.R.
� 166.3 (2000) BY RESPONDENTS FIRST FINANCIAL AND JOHNSON:
FAILURE TO SUPERVISE DILIGENTLY

50. Paragraphs 1 through 49 are re-alleged and incorporated by reference.

51. First Financial and Johnson have supervisory duties relating to their business as Commission registrants.

52. First Financial and Johnson have failed to exercise diligently their supervisory duties, including, but limited to the following:

(i) Failing to supervise diligently the sales practices and the sales solicitations of First Financial's APs;

(ii) Failing to supervise diligently the trading of customer accounts; and

(iii) Failing to design, implement, monitor and follow a program of supervision and compliance designed to deter and detect violations of the Act or the Commission's Regulations including, but not limited to, the foregoing violations of Section 4c(b) of the Act and Section 33.10 of the Commission's Regulations.

53. For all the foregoing reasons, First Financial and Johnson have failed to supervise diligently the handling by their partners, officers, employees and agents (or persons occupying a similar status or performing a similar function) of all commodity interests accounts that they have carried, operated, advised or introduced and all other activities of their partners, officers, employees, and agents (or persons occupying a similar status or performing a similar function) relating to their business as Commission registrants, in violation of Section 166.3 of the Commission's Regulations.

54. Each failure to supervise diligently, including but not limited to, those specifically identified and incorporated by reference herein, is alleged as a separate and distinct violation of Section 166.3 of the Commission's Regulations.

By reason of the foregoing allegations, the Commission deems it necessary and appropriate, pursuant to its responsibilities under the Act, to institute public administrative proceedings to determine whether allegations set forth in Parts I-IV above are true, and, if so, whether an appropriate order should be entered in accordance with Sections 6(c), 6(d), 8a(3) and 8a(4) of the Act, 7 U.S.C. �� 9, 15, 13b, 12a(3) and 12a(4) (1994).

Section 6(c) allows the Commission to enter an order (1) prohibiting a respondent from trading on or subject to the rules of any contract market and requiring all contract markets to refuse such person all trading privileges thereon for such a period as may be specified in the Commission's Order, (2) if the respondent is registered with the Commission in any capacity, suspending, for a period not to exceed six months, or revoking the registration of that respondent, (3) assessing against the respondent a civil penalty not more than the higher of $110,000 or triple the monetary gain to the respondent for each violation of the Act or Regulations; and (4) requiring restitution to customers of damages proximately caused by the violations of the respondent.

Section 6(d) allows the Commission to enter an Order directing that the respondent cease and desist from violating the provisions of the Act and Regulations found to have been violated.

Sections 8a(3) and 8a(4) allow the Commission to refuse to register, to register conditionally, to suspend, to revoke or to place restrictions upon the registration of any respondent if cause exists for such action pursuant to Section 8a(3).

VI.

WHEREFORE, IT IS HEREBY ORDERED that a public hearing for the purpose of taking evidence and hearing arguments on the allegations set forth in Parts I-IV above be held before an Administrative Law Judge, in accordance with the Rules of Practice under the Act, 17 C.F.R. � 10.1 et seq. (2000), at a time and place to be fixed as provided in Section 10.61 of the Rules of Practice, 17 C.F.R. � 10.61 (2000), and that all post-hearing procedures shall be conducted pursuant to Sections 10.81 through 10.107 of the Rules of Practice, 17 C.F.R. �� 10.81 through 10.107 (2000).

IT IS FURTHER ORDERED that First Financial, Johnson, Glover and DeWitte (collectively "respondents") shall file an Answer to the allegations against them in the Complaint within twenty (20) days after service, pursuant to Section 10.23 of the Rules of Practice, 17 C.F.R. � 10.23 (2000), and pursuant to Section 10.12(a) of the Rules of Practice, 17 C.F.R. � 10.12(a) (2000), shall serve two copies of such Answer and of any document filed in this proceeding upon Richard Glaser, Leanna Morris or Jason Gizzarelli, Trial Attorneys, Commodity Futures Trading Commission, Division of Enforcement, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, or upon such other counsel as may be designated by the Division. If respondents fail to file the required Answer or fail to appear at a hearing after being duly served, respondents shall be deemed in default, and the proceeding may be determined against them upon consideration of the Complaint, the allegations of which shall be deemed to be true.

IT IS FURTHER ORDERED that this Complaint and Notice of Hearing shall be served on respondents personally or by certified or registered mail forthwith pursuant to Section 10.22 of the Commission's Rules, 17 C.F.R. � 10.22 (2000).

In the absence of an appropriate waiver, no officer or employee of the Commission engaged in the performance of the investigative or prosecutorial functions in this or any factually related proceeding will be permitted to participate or advise in the decision upon this matter except as witness or counsel in proceedings held pursuant to notice.

		By the Commission.
Dated: September 28, 2000		______________________
		Jean A. Webb
		Secretary to the Commission
		Commodity Futures Trading Commission