UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

In anticipation of the institution of this administrative proceeding, Read/NATT and Global have each submitted an offer of settlement ("Offer"), which the Commission has determined to accept. Without admitting or denying the findings of this Order, and without to any adjudication on the merits, Read/NATT and Global each acknowledge service of this Order. Read/NATT and Global consent to the use of the findings in this Order in this or any other proceedings brought by the Commission or to which the Commission is a party.1

III.

The Commission finds the following:

A. Summary

Eron Demian Read ("Read"), d/b/a New Age Trading Techniques ("NATT"), sells a commodity trading system and related services through an Internet website. Through NATT, Read offers a computer trading course, a training manual, "daily trade logs", an opportunity for customers to participate in and be tutored in chat rooms by e-mail, and trade "indicators." He offers to customize these indicators to fit a customer's personal trading style. Through his website and advertisements in trading publications, Read conveys a false impression that he is actually trading the market and providing live commentary as the market trades. In addition, Read/NATT agreed with Global, an introducing broker, to post Global's offer of a rebate on his website. The manner in which this rebate offer was presented to the public gave the false impression that the cost of any NATT products purchased could be recouped through an immediate credit to a Global brokerage account. 2

B. Respondents

Despite these statements, in most instances, the website and Daily Trade Logs failed to specify which trades were the result of hypothetical or simulated trading.3 In fact, but for some trading in early 1997, all the trades are hypothetical.

Read's Advertisements

In addition to the materials on his website, Read placed advertisements in various industry publications. The advertisements read, in relevant part:

The facts that Read had not traded since 1997 and that the trades were not live but were hypothetical make the advertisements and claims fraudulent and deceitful.

The Agreement Between Read and Global

On December 10, 1998, Global, entered into a written promotion agreement with Read in which Global agreed to issue "credit directly or through rebate of commissions spent to the trading account" to any NATT customer who opened a trading account with Global. This agreement explicitly set out the specific language of a "Special Offer" that Read presented to his customers on the website. The "Special Offer" stated in part:

These representations gave the false impression that Global would provide an immediate credit of the amount a customer had spent on NATT trading systems in the customer's trading account, reimbursing the customer for his or her outlay for the course and providing a risk-free amount of money with which to begin trading. Read added to this false impression by also posting a website promotion that read, in part: "[H]ave a broker pay [in full] for the NATT course."

In reality, Global's "rebate" was $5 off each $25 commission paid by the customer for a round-turn trade. In order to recoup the $1600 average price for the NATT complete package, a customer would have to have engaged in 64 round-turn trades at a cost of thousands of dollars. Therefore, the impression created by Read and NATT and Global that Global would provide an immediate and full credit was false and misleading.

D. Legal Discussion

VIOLATIONS OF THE ACT AND COMMISSION REGULATIONS

1. Read Violated Sections 4b(a) (i) and (iii) of the Act

Sections 4b(a)(i) and (iii) of the Act provide that it shall be unlawful, in or in connection with any order to make or the making of a futures contract, for or on behalf of any other person, (i) to cheat or defraud, or attempt to cheat or defraud, such other person, or (iii) willfully to deceive or attempt to deceive such other person by any means whatsoever in regard to any such order or contract or the disposition or execution of any such order or contract, or in regard to any act of agency performed with respect to such order or contract for such person. Misrepresentations and omissions of material facts made with scienter regarding futures transactions constitute fraud under Section 4b(a) of the Act.⁴ Additionally, Sections 4b(a)(i) and (iii) require that the material misrepresentations and omissions of material facts be made "in connection" with futures transactions.⁵

Read represented that he was actually trading and that customers could observe him trading knowing that he was not actually trading and that his daily trade logs were not based on actual trading, but rather on hypothetical trading. A statement is material if a reasonable investor would have considered the information important in making a decision to invest. Sudol v. Shearson Loeb Rhoades Inc., [1984-1986 Transfer Binder] Comm. Fut. L. Rep.(CCH) � 22,748, at 31,119 (CFTC September 30, 1985). "Because simulated results inherently overstate the reliability and validity of an investment system, and because extravagant claims understate the inherent risks in commodities trading, a reasonable investor would find [such] fraudulent misrepresentations to be material." R&W Technical Svcs., 2000 WL at *3. See also CFTC v. Skorupskas, 605 F. Supp. 923, 933 (E.D. Mich. 1985) (misrepresenting performance tables as being actual trading results violated Section 4b of the Act).

Read's misrepresentations were "in connection" with futures transactions because he was marketing a trading system that was designed as a tool specifically for use in the futures markets, he offered to customize those systems to his customers' personal trading styles, and his advertisements for his trading system were fraudulent and deceptive. R & W Technical Svcs., 2000 WL at *22 (finding that the marketing of computerized trading systems not merely as computer software, but as a tool specifically for use in the futures markets satisfied the "in connection with" requirement); Skorupskas 605 F. Supp at 933 (fraudulent advertisements for a computerized trading system can satisfy the "in connection with" requirement under Section 4b of the Act).

The "Special Offer" for a rebate that Read set out in the website by agreement with Global gave the false impression that Global would provide an immediate credit of the amount a customer spent on NATT trading systems into the customer's trading account when, in reality, Global only provided $5 off a $25 commission per trade. Misrepresentations concerning fees, commissions and likelihood of profit violate Section 4b of the Act. CFTC v. Crown Colony Options, Ltd., 434 F.Supp 911, 917-918 (S.D.N.Y. 1977).

Read's misrepresentations were also "in connection with" futures transactions because the promotion for a "rebate" was a marketing tool used to attract customers to purchase Read's trading system and to open a commodities trading account and trade through Global. Skorupskas 605 F. Supp at 933. Read's representations were material because a reasonable investor certainly would consider an offer providing for a credit or rebate to a brokerage account in deciding where to open a commodity trading account.

Read made the misrepresentations with the requisite scienter. Misleading statements are made with scienter when they are committed intentionally or with reckless disregard. R & W Technical Svcs., 2000 WL at *20. Read prepared the written agreement, including the wording of the "Special Offer" contained in the agreement that created the false impression that NATT customers could recover all of the money spent on NATT materials immediately if they opened trading accounts. As a professional, Read knew or recklessly disregarded the fact that no independent broker would rebate $1600 immediately to a new customer without linking it to actual business and continuing business. Therefore, Read acted with scienter in putting the offer on his website. Id.

2. Read Violated Section 4o(1) of the Act and Section 4.41 of the Regulations

Section 4o(1) of the Act prohibits CTAs from (a) employing any device, scheme or artifice to defraud any client or participant or prospective client or participant, or (b) engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant. Section 4.41(a) of the Regulations prohibits a CTA or principal thereof from advertising in a fraudulent or misleading manner.

In order to establish a violation of Section 4o of the Act and Section 4.41 of the Regulations, the Division must prove that respondent was (i) a CTA or, with respect to Section 4.41(a) of the Regulations, a principal thereof, and (ii) either (a) employed any device, scheme, or artifice to defraud any client or prospective client, or (b) engaged in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client. Section 4o(1) of the Act, which also requires the use of the mails or any means or instrumentality of interstate commerce, prohibits both registered and unregistered CTAs from defrauding their clients.⁶

Under Section 1a(5) of the Act, in order to establish that someone is a CTA, it must be shown that the person (i) advised another about the value or advisability of trading in futures contracts, (ii) "either directly or through publications, writings or electronic media," (iii) for compensation or profit, unless that person is "the publisher or producer of any print or electronic data of general and regular dissemination, including its employees" if such publisher's or producer's provision of commodity futures trading advice is "solely incidental to the conduct of [its] business or profession."⁷

Read gave commodity futures trading advice for compensation or profit and, therefore, he is a CTA, and was a CTA even before he registered as such.⁸ Read's advertisements, promotional materials and website that all make claims about actual trading that were false, and Read's agreement to place Global's deceptive offer to customers on his website violate Section 4o(1) of the Act and Section 4.41(a) of the Commission's Regulations for the same reasons they violate Sections 4b(a)(i) and (iii) of the Act.

3. Global violated Section 4b(a)(i) and (iii) of the Act

Global and Read/NATT entered into an agreement that Read/NATT would promote the fraudulent rebate offer on Read's website. That agreement expressly set forth the language of the offer to be posted on Read/NATT's website. Global thus knew the terms of the posted offer did not comport with the actual terms of the rebate. Therefore, Global knowingly violated Section 4b(a)(i) and (iii) of the Act by falsely representing the rebate offer.

IV.

Offer of Settlement

Read and Global have submitted Offers of Settlement ("Offers") in which they, without admitting or denying the findings in this Order: (1) admit the jurisdiction of the Commission with respect to all matters set forth in the Order; (2) acknowledge service of this Order; (3) waive the filing and service of a Complaint and Notice of Hearing; a hearing; all post-hearing procedures; judicial review by any court; any objection to the staff's participation in the Commission's consideration of the Offers; any claim of Double Jeopardy based upon the institution of this proceeding or the entry of any order imposing a civil penalty or any other relief; and, all claims which Read or Global may possess under the Equal Access to Justice Act, 5 U.S.C. � 504 (1994) and 28 U.S.C. �2412 (1994) as amended by Pub L. No. 104-121, �� 231-32, 110 Stat. 847 and Part 148 of the Commission's Regulations, 17 C.F.R. � 148.1 et seq., relating to or arising from the Order; (4) stipulate that the record basis on which the Order may be entered consists solely of the Order and the findings consented to in the Offer, which are incorporated in the Order; and (5) consent to the Commission's issuance of this Order, which makes findings set forth below and (a) orders Read and Global to cease and desist from violating the provisions of the Act and Regulations that they have been found to have violated; (b) orders Global to pay a civil monetary penalty as set forth below; (c) notes the appropriateness of a civil monetary penalty, but does not impose one based upon Read's demonstrated inability to pay; and (d) orders Read and Global to comply with the undertakings as set forth in the Order below.

V.

Findings of Violations

Solely on the basis of the consent evidenced by the Offers, and prior to any adjudication of the merits by the Commission, the Commission finds that Read violated Sections 4b(a)(i) and (iii) and 4o(1) of the Act and Commission Regulation 4.41(a), and Global violated Section 4b(a)(i) and (iii) of the Act.

VI.

Order

Accordingly, IT IS HEREBY ORDERED THAT:

1. (a) Read shall cease and desist from violating Sections 4b(a)(i) and (iii) and 4o(1) of the Commodity Exchange Act ("the Act"), as amended, 7 U.S.C. �� 6b(a)(i) and (iii), 6o(1), and Section 4.41(a) of the Commission's Regulations, 17 C.F.R. � 4.41(a) (1999), and (b) Global shall cease and desist from violating Sections 4b(a)(i) and (iii) of the Act;

2. (a) Global shall pay Ten Thousand Dollars ($10,000), which represents a civil monetary penalty. Global shall pay the total amount within ten days of the date of the Order by electronic funds transfer, or by U.S. postal money order, certified check, bank cashier's check, or bank money order, made payable to the Commodity Futures Trading Commission, and sent to Dennese Posey, Division of Trading and Markets, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21^st Street, N.W., Washington, D.C. 20581 under cover of a letter identifying Global and the name and docket number of the proceeding. Global shall simultaneously transmit a copy of its cover letter and of the form of payment to Phyllis J. Cela, Acting Director, Division of Enforcement, Commodity Futures Trading Commission, 1155 21^st Street, N.W., Washington, D.C 20581; and (b) The Commission is not imposing a civil monetary penalty against Read but notes the appropriateness of a monetary penalty. Read has submitted a Sworn Financial Disclosure Statement and has provided other evidence to the Commission regarding his financial condition and asserts his financial inability to pay a civil monetary penalty. Read acknowledges that the Commission's acceptance of this offer is conditioned upon the accuracy and completeness of his representations in his Sworn Financial Disclosure Statement and other evidence he has provided regarding his financial condition. Read consents that if at any time following the entry of the Order, the Division obtains information indicating that his representations concerning his financial condition were fraudulent, misleading, inaccurate or incomplete in any material respect at the time they were made, the Division may, at any time following the entry of the Commission's Order, petition the Commission to (1) reopen this matter to consider whether Read provided accurate and complete financial information at the time such representations were made; (2) determine the amount of civil monetary penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if the Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Read was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of civil monetary penalty to be imposed, and whether any additional remedies should be imposed. Read may not, by way of defense to any such petition, contest the validity of, or the findings in, the Order, or assert that payment of a civil monetary penalty should not be ordered.

3. Read and Global shall comply with the undertakings as set forth below.

Unless otherwise specified, the provisions of this Order shall be effective on this date.

NOTES:

1 Neither Read nor Global consents to the use of the Offer or this Order, or the findings herein, as the sole basis for any other proceeding brought by the Commission other than a proceeding to enforce the terms of the Order. They do not consent to the use of the Offer or the Order, or the findings herein, by any other party in any other proceeding. The findings consented to in the Offer or made in the Order are not binding on any other person or entity in any other proceeding before the Commission.

2 The Internet is a highly beneficial medium that facilitates the dissemination of information, but which also enables potential violators to reach millions of people worldwide quickly and at very low cost. By this and other proceedings, the Commission is addressing fraud committed on the internet to promote the integrity of promotions made concerning commodity futures and options trading opportunities on the web.

3 Read does not currently provide Daily Trade Logs on his website.

4 In the Matter of R&W Technical Services, Inc., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) �27,582 at 47,740-47,741 (CFTC Mar. 16, 1999), aff'd in relevant part, R&W Technical Svcs., Inc. v. CFTC, 2000 WL 217498 (5th Cir. Feb. 24, 2000). See, e.g., Saxe v. E.F. Hutton, 789 F.2d 105, 110 (2d Cir. 1986); Kelley v. Carr, 442 F. Supp. 346, 351-54 (W.D. Mich. 1977), aff'd in part, rev'd in part, 691 F.2d 800 (6^th Cir. 1980); CFTC v. J.S. Love Associates Options, Ltd., 422 F. Supp. 652, 655 (S.D.N.Y. 1976).

5 Fraudulent statements that induce members of the public to purchase software that generates specific buy and sell signals for commodity futures trading satisfy the "in connection with" requirement of Section 4b(a). R&W Technical Svcs., 2000 WL at 217498 . See also Hirk v. Agri-Research Council, Inc., 561 F.2d 96 (7th Cir. 1977) (noting that the "in or in connection with" requirement should be interpreted flexibly to include deceptive conduct that occurs prior to the opening of an actual commodity trading account).

6 CFTC v. Savage, 611 F.2d 270, 281 (9th Cir. 1979) (enforcement action charging defendant with making false reports to customers, engaging in "wash" trades and holding himself out to the public as a CTA without being registered with the Commission).

7 Section 1a(5) of the Act, 7 U.S.C. � 1a(5). Section 4o(1) of the Act and Section 4.41 of the Regulations thus do not apply to a CTA who is "the publisher or producer of any print or electronic data of general and regular dissemination, including its employees" whose "furnishing of [advice] ... is solely incidental to the conduct of their business or profession." This exclusion is designed to protect incidental publishers of advice, such as general magazines and newspapers, not publishers who specifically concentrate on commodities advice. R&W Technical Svcs., 2000 WL at *7.

8 See CFTC v. British American Commodity Options Corp., 560 F.2d 135, 141 (2d Cir. 1977), cert. denied, 438 U.S. 905 (1978)(a firm that "offer[ed] opinions and advice, and issued analyses and reports concerning the value of commodities" to customers, was a CTA under the Act.); Gaudette v. Panos, 644 F. Supp. 826, 839 (D. Mass. 1986) (defendants who represented their advisory skills to be exemplary, suggested that plaintiffs open a commodity account and then recommended certain futures contracts for investment were CTAs).