UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA

I. SUMMARY

1. Since at least July 1998, defendants Matrix Trading Group, Inc. ("Matrix"), David Wedeen ("Wedeen"), and Christopher Smithers ("Smithers") have fraudulently solicited customers to open accounts with Matrix and to purchase 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 Matrix customers based upon the Matrix trading strategy.

2. From at least March 1998 to July 1998, defendant Smithers fraudulently solicited customers to open accounts with Infinity Trading Group ("Infinity") and to purchase 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 Infinity customers.

3. Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. � 13a-1, plaintiff Commodity Futures Trading Commission ("Commission") brings this action to enjoin the defendants' unlawful acts and practices and to compel their compliance with the Commodity Exchange Act ("Act"). In addition, the Commission seeks disgorgement of the defendants' ill-gotten gains, restitution to customers of damages proximately caused by the defendants' fraud, civil monetary penalties and such other relief as this Court may deem necessary or appropriate.

4. Unless restrained and enjoined by this Court, defendants are likely to continue to engage in the acts and practices alleged in this Complaint and similar acts and practices, as more fully described below.

II. JURISDICTION AND VENUE

5. The Act establishes a comprehensive system for regulating the purchase and sale of commodity futures contracts and options on commodity futures. This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7 U.S.C. � 13a-1, which provides that, whenever it shall appear to the Commission that any person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation, or order promulgated thereunder, the Commission may bring an action against such person to enjoin such practice or to enforce compliance with the Act.

6. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. � 13a-1(e), because the defendants are found in, inhabit, or transact business in this District or the acts and practices in violation of the Act have occurred, are occurring, or are about to occur within this District, among other places. In particular, Matrix established a business address in Singer Island, Florida, solicited customers from its Florida business office, and solicited and received funds from investors residing in the Southern District of Florida.

III. THE PARTIES

7. Plaintiff Commission is a federal independent regulatory agency which is charged with the administration and enforcement of the Act, 7 U.S.C. �� 1 et seq., and the regulations promulgated thereunder.

8. Defendant Matrix Trading Group, Inc. is a Florida corporation with its principal place of business at 2655 North Ocean Drive, Suite 401, Singer Island, Florida 33404. Matrix was registered as a guaranteed introducing broker ("IB") of First American Discount Corporation from August 17, 1998 to July 9, 2000. Matrix has been registered as a guaranteed IB of Universal Financial Holding Corporation since July 10, 2000 and as a commodity trading advisor since May 13, 1999.

9. Defendant David Wedeen, who resides at 184 Cypress Point Drive, Palm Beach Gardens, Florida 33418, was the President and a principal of Matrix, and was registered as an associated person ("AP") of Matrix from July 22, 1998 to August 1, 2000. He is currently a principal and registered as an AP of a sole proprietorship under his own name.

10. Defendant Christopher Smithers, who resides at 12508 Windmill Drive, Palm Beach Gardens, Florida 33418, is the Vice President and a principal of Matrix, and has been registered as an AP of Matrix since July 22, 1998. He is also a principal and registered as an AP of Capital Futures Group, a registered guaranteed IB, as of September 6, 2000. From March 1998 to July 1998, Smithers was registered as an AP of Infinity Trading Group ("Infinity"), an IB in Palm Beach Gardens, Florida.

IV. FACTUAL BACKGROUND

A. Matrix Trading Group

11. Beginning in or about July 1998, Matrix, Wedeen and Smithers solicited members of the general public to open accounts with Matrix to trade commodity options.

12. Wedeen and Smithers operated the Matrix office since its inception. Wedeen severed his relationship with Matrix on or about August 1, 2000. To date, Matrix has employed a total of approximately twenty APs and currently employs approximately twelve APs. Wedeen and/or Smithers have made all hiring and firing decisions at Matrix. Many of the APs have learned their trade on the job at Matrix, and all have received training directly from Wedeen and/or Smithers upon being hired.

13. Wedeen, during his tenure at Matrix, and Smithers have trained the APs to use a specific trading strategy (the "Matrix strategy") devised by Wedeen. The Matrix strategy purportedly compares the market positions and activity of large commercial traders to those of small traders using the Commitment of Traders Report (the "Large Traders Report"), a document published by the Commission, and a "market sentiment" report published by Bridge (the "Small Traders Report"). When the Large Traders Report shows that the large commercial traders are buying (or selling) a given commodity futures contract and the Small Traders Report shows that the smaller traders are selling (or buying) that futures contract, Matrix advises customers to follow the large commercial traders and buy (sell).

14. Wedeen commonly gave the APs specific trades to recommend to customers based upon the Matrix strategy. However, Matrix APs at times provided their own trading advice.

15. Wedeen and Smithers have been aware of the commodity options purchased and sold by Matrix customers, as well as Matrix customers' trading results, because they:

i. Misrepresentations Exaggerating the Likelihood of Profit

16. During the course of telephone sales solicitations, Matrix, through its APs, including Wedeen and Smithers, has misrepresented the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the following misrepresentations:

ii. Misrepresentations and Omissions Minimizing the Risk of Loss

17. During the course of telephone sales solicitations, Matrix, through its APs, including Wedeen and Smithers, routinely has failed to disclose adequately the risk of loss inherent in trading commodity options. Occasional references to risk have been nullified by Matrix's high-pressure sales tactics and by its misrepresentations and omissions which falsely convey that while losses on commodity options are theoretically possible, purchasing commodity options with Matrix is virtually risk free. Such misrepresentations and omissions include, but are not limited to, the following:

iii. Misrepresentations Overstating Matrix's Performance Record

18. During the course of telephone sales solicitations, Matrix, through its APs, including Wedeen and Smithers, has misrepresented and overstated Matrix's performance record to customers, including, but not limited to, the following misrepresentations:

19. In fact, customers of Matrix entered into commodity option trades which seldom, if ever, made the magnitude of profits represented. The vast majority of Matrix's customers lost money on their accounts as a whole.

20. From July 1998 through June 2000, Matrix opened approximately 450 accounts. Approximately ninety-two percent (92%) of these accounts suffered net losses. Total net profits in Matrix's thirty-six (36) profitable accounts for this time period were approximately $100,221.22, while total net losses in Matrix's four-hundred and fourteen (414) unprofitable accounts were approximately $3,252,110.30.

B. Smithers' Fraudulent Representations and Omissions at Infinity Trading Group

21. From in or about March 1998 to July 1998, Smithers fraudulently solicited members of the general public to open accounts with Infinity to trade commodity options.

22. During the course of telephone sales solicitations while at Infinity, Smithers misrepresented the likelihood of customers profiting from the purchase of commodity options, including, but not limited to, the misrepresentation that customers could expect the price of a given commodity to "go way up," or words to that effect.

23. During the course of telephone sales solicitations while at Infinity, Smithers routinely failed to disclose adequately the risk of loss inherent in trading commodity options. Occasional references to risk were nullified by Smithers' 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 Infinity was virtually risk free.

24. During the course of telephone sales solicitations while at Infinity, Smithers misrepresented and overstated his performance record to customers, including, but not limited to, the following misrepresentations:

25. Smithers continued to make these misrepresentations at Matrix and trained Matrix personnel in the use of these misrepresentations.

V. VIOLATIONS OF THE COMMODITY EXCHANGE ACT AND COMMISSION REGULATIONS

COUNT ONE

VIOLATIONS OF SECTION 4c(b) OF THE ACT AND
AND SECTION 33.10 OF THE REGULATIONS:
FRAUD BY MISREPRESENTATION AND OMISSION OF MATERIAL
FACTS IN CONNECTION WITH THE SOLICITATION AND
MAINTENANCE OF COMMODITY OPTION TRANSACTIONS

26. Paragraphs 1 through 25 above are re-alleged and incorporated by reference.

27. Matrix, Wedeen, and Smithers knew or recklessly disregarded the fact that the representations in their telephone sales solicitations set forth in paragraphs 16 through 18 were false, deceptive, or misleading, and they knew or recklessly disregarded the fact that the Matrix telephone sales solicitations failed to disclose facts material to customers.

28. 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, Matrix, Wedeen, and Smithers 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 16 through 18, in violation of Section 4c(b) of the Act, 7 U.S.C. � 6c(b), and Regulation 33.10, 17 C.F.R. � 33.10.

29. The foregoing acts, omissions and failures of Wedeen, Smithers and the Matrix APs occurred within the scope of each such person's employment or office with Matrix. Matrix is therefore liable for these acts pursuant to Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. � 2(a)(1)(A)(iii).

30. Wedeen and Smithers have willfully aided, abetted, counseled, commanded, induced, procured, caused, or acted in combination or concert with other persons in the foregoing violations of Section 4c(b) of the Act, 7 U.S.C. � 6c(b), and Regulation 33.10, 17 C.F.R. � 33.10. Wedeen and Smithers are therefore responsible for these violations by operation of Section 13(a) of the Act, 7 U.S.C. � 13c(a).

31. Wedeen and Smithers, directly or indirectly, controlled Matrix and did not act in good faith, or knowingly induced, directly or indirectly, the acts constituting these violations of Section 4c(b) of the Act, 7 U.S.C. � 6c(b), and Regulation 33.10, 17 C.F.R. � 33.10. Wedeen and Smithers are therefore liable for these violations by operation of Section 13(b) of the Act, 7 U.S.C. � 13c(b).

32. Smithers knew or recklessly disregarded the fact that the representations in his telephone sales solicitations while at Infinity set forth in paragraphs 22-24 were false, deceptive, or misleading, or had no reason to believe that they were true, and he knew or recklessly disregarded that his telephone sales solicitations failed to disclose material facts to customers.

33. 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, Smithers, while at Infinity, 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 22-24, in violation of Section 4c(b) of the Act, 7 U.S.C. � 6c(b), and Regulation 33.10, 17 C.F.R. � 33.10.

34. Each material misrepresentation or omission, and each willful deception made during the relevant time period by Wedeen, Smithers, and/or Matrix, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4c(b) of the Act, 7 U.S.C. � 6c(b), and Regulation 33.10, 17 C.F.R. � 33.10.

COUNT TWO

VIOLATION OF SECTION 166.3 OF THE REGULATIONS:
FAILURE TO DILIGENTLY SUPERVISE THE HANDLING
OF COMMODITY INTEREST ACCOUNTS BY EMPLOYEES

35. Paragraphs 1 through 34 above are re-alleged and incorporated by reference.

36. Matrix, Wedeen, and Smithers have supervisory duties relating to their business as Commission registrants.

37. Matrix, Wedeen, and Smithers have failed to exercise diligently their supervisory duties, including, but not limited to, the following:

38. For all the foregoing reasons, Matrix, Wedeen, and Smithers have failed to supervise diligently the handling by their partners, officers, employees and agents (or persons occupying similar status or performing a similar function) of all commodity interest accounts that they 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 Regulations, 17 C.F.R. � 166.3.

39. Each act by Wedeen, Smithers, and/or Matrix that constitutes a failure to supervise diligently the handling by their partners, officers, employees and agents (or persons occupying similar status or performing a similar function) of all commodity interest accounts that they 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, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 166.3 of the Regulations, 17 C.F.R. � 166.3.

VI. RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that this Court, as authorized by Section 6c of the Act, 7 U.S.C. � 13a-1, and pursuant to its own equitable powers, enter:

a) an order finding the defendants liable for violating Section 4c(b) of the Act and Sections 33.10 and 166.3 of the Regulations;

b) a permanent injunction prohibiting the defendants from engaging in conduct violative of Section 4c(b) of the Act and Sections 33.10 and 166.3 of the Regulations and from engaging in any commodity-related activity, including soliciting new customers;

c) an order directing the defendants to disgorge, pursuant to such procedure as the Court may order, all benefits received from the acts or practices which constitute violations of the Act or Regulations, as described herein, and interest thereon from the date of such violations;

d) an order directing the defendants to make full restitution, pursuant to such procedure as the Court may order, to every customer whose funds were received by them as a result of acts and practices which constituted violations of the Act and Regulations, as described herein, and interest thereon from the date of such violations;

e) an order directing the defendants to pay a civil monetary penalty in the amount of not more than the higher of $110,000 or triple the monetary gain to each defendant for each violation of the Act or Regulations; and

f) such other and further remedial ancillary relief as the Court may deem appropriate.