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I.

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

SUMMARY

1. From August 1993 through October 1996, Max Walters ("Walters"), a general partner, committed fraud upon a limited partnership (the "Limited Partnership") and limited partner (the "Limited Partner") in connection with commodity futures and options trading, in violation of Sections 4b(a)(i), 4b(a)(ii) and 4c(b) of the Commodity Exchange Act, as amended (the "Act"), and Section 33.10(a) and (b) of the Commodity Futures Trading Commission's Regulations ("Regulations").

2. The Limited Partnership formed by Walters and the Limited Partner for the purpose of having Walters trade commodity futures. Walters operated the Limited Partnership from at least August 1993 through October 1996 (the "relevant time period"). During the relevant time period, Walters misrepresented the success of the venture's futures trading to the Limited Partner, both orally and in written statements. Walters also siphoned money from the partnership for personal trading and other personal benefit. Through this conduct, Walters defrauded the Limited Partner out of more than $1 million.

RESPONDENT

3. Walters was registered with the Commission as a floor broker from 1985 until July 16, 1997, when his registration was terminated. He resides at 1233 Stratford Road, Kansas City, Missouri 64113.

FACTS

4. In 1993, Walters was a floor broker with a seat on the Kansas City Board of Trade. Brewer was a resident of North Carolina and had no experience or expertise in commodity futures and options trading.

5. In the summer of 1993 and at various times during the relevant time period, Walters represented to the Limited Partner that he had a system of trading futures with which he had been making a 600 percent annual return. Walters further represented that he would trade conservatively, would not keep trades open overnight, and would not trade options. Walters knew these representations were false when he made them.

6. Believing Walters' representations, the Limited Partner agreed to form the Limited Partnership for the purpose of having Walters trade commodity futures.

7. In forming the partnership, the Limited Partner and Walters agreed that Walters would be responsible for all trading decisions and for the day-to-day operation of the partnership.

8. The Limited Partner contributed an initial $100,000 to the Limited Partnership in August 1993 for Walters to trade commodity futures.

9. The Limited Partner asked Walters to keep him informed of the Limited Partnership's monthly trading results. In response to this request, Walters fabricated and sent to the Limited Partner false monthly statements from at least January 1994 through August 1996. From at least March 1995 through August 1996, Walters also prepared and provided to the Limited Partner separate spreadsheets, which reflected false trading profits and omitted trading losses.

10. In 1995 Walters provided to the Limited Partner's accountant a fictitious Internal Revenue Service Form 1099, which purported to show a net profit for the Limited Partnership in 1994. The true and correct Form 1099 for 1994, which Walters had in his possession, showed losses for the Limited Partnership.

11. Based on the falsified documentation and oral misrepresentations, Walters led the Limited Partner to believe that the Limited Partnership was earning constant trading profits, and to believe that the trading profits exceeded $945,000 by September 1996.

12. In reality, the Limited Partnership was incurring trading losses over time that exceeded $811,000 by September 1996.

13. In addition, despite Walters' prior representations to the Limited Partner, Walters kept futures positions open overnight and purchased and sold options on commodity futures contracts for the Limited Partnership. He also placed many more trades than he disclosed to the Limited Partner.

14. During the relevant time period, Walters was aware that his written and oral representations to the Limited Partner and to the Limited Partner's accountant regarding the nature, extent and profitability of the Limited Partnership's trading activities were false.

15. During the relevant time period, Walters also misappropriated limited partnership funds for personal trading and other personal uses.

16. Walters did not disclose his misappropriation of funds to the Limited Partner. Rather, the Limited Partner believed that, in order to build its capital, the partnership was not making any distributions to the partners.

17. Throughout the relevant time period, Walters also did not disclose to the Limited Partner the material fact that Walters would take commissions in connection with the trading of the Limited Partnership's trading accounts.

18. Walters made the material misrepresentations and omissions alleged herein willfully.

19. Unaware of Walters' misrepresentations and omissions, the Limited Partner, in addition to his initial $100,000 investment, contributed capital to the Limited Partnership as follows:

a. $200,000 on or about January 21, 1994;

b. $300,000 on or about August 31, 1994;

c. $200,000 on or about March 2, 1995;

20. In August 1995, the Limited Partner also loaned Walters $500,000 based on Walters' false representation that he was required to post the money as bond with the Kansas City Board of Trade in order to continue to trade on behalf of the Limited Partnership. Walters never posted such bond with the exchange and has not repaid this $500,000 "loan."

COUNT ONE

VIOLATIONS OF SECTIONS 4b(a)(i), 4b(a)(iii) AND 4c(b), OF THE
ACT AND REGULATION 33.10(a): WALTERS' FRAUD BY
MISREPRESENTATIONS, OMISSIONS AND MISAPPROPRIATION

21. Paragraphs 1-20 are realleged and incorporated herein by reference.

22. From at least August 1993 through October 1996, Walters cheated, defrauded or deceived or attempted to cheat, defraud or deceive the Limited Partnership and the Limited Partner, in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, on or subject to the rules of any contract market, for or on behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or by-products thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped or received in interstate commerce for the fulfillment thereof; and in or in connection with offers to enter into, the entry into, the confirmation of the execution of or the maintenance of, commodity option transactions, by conduct including, but not limited to, the following:

a. misrepresentations and omissions regarding the likelihood of trading success;

b. misrepresentations and omissions regarding the nature and extent of his intended and actual trading activities;

c. misrepresentations and omissions regarding the Limited Partnership's trading profits and losses;

d. misrepresentations and omissions regarding the benefits he received for managing and trading for the Limited Partnership;

e. misrepresentations and omissions regarding the use of the Limited Partner and Limited Partnership's funds; and

f. misappropriation of limited partnership funds for Walters' personal use and for trading on behalf of Walters' son.

23. By the acts and omissions alleged in this Count, Walters violated Sections 4b(a)(i), 4b(a)(iii) and 4c(b) of the Act, 7 U.S.C. ���6b(a)(i), 6b(a)(iii) and 6c(b) (1994), and Regulation 33.10(a), 17 C.F.R. ��33.10(a) (1998).

COUNT TWO

VIOLATIONS OF SECTIONS 4b(a)(ii) AND 4c(b)
OF THE ACT AND REGULATION 33.10(b):
WALTERS' FRAUD BY FALSE REPORTS

24. Paragraphs 1-20 are realleged and incorporated herein by reference.

25. From at least August 1993 through October 1996, Walters, in or in connection with orders to make, or the making of, contracts of sale of commodities for futures delivery, made, or to be made, on or subject to the rules of any contract market, for or behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or by-products thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped or received in interstate commerce for the fulfillment thereof; and in or in connection with offers to enter into, the entry into, the confirmation of the execution of or the maintenance of, commodity option transactions, willfully made or caused to be made to the Limited Partner and his agents written reports and statements that falsely represented the monthly profits and/or losses incurred by the Limited Partnership in trading commodity futures and options on futures.

26. By the acts and omissions alleged in this Count, Walters violated Sections 4b(a)(ii) and 4c(b) of the Act, 7 U.S.C. ���6b(a)(ii) and 6c(b) (1994), and Regulation 33.10(b), 17 C.F.R. ��33.10(b) (1998).

II.

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

Section 6(c) of the Act allows the Commission, among other things, 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 period as may be specified in the Commission's Order,

(2) assessing against a respondent a civil penalty of not more than the higher of $100,000 ($110,000 for violations committed after November 27, 1996) or triple the monetary gain to the respondent for each violation, and

(3) 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.

III.

WHEREFORE, IT IS HEREBY ORDERED that a public hearing for the purpose of taking evidence and hearing arguments on the allegations set forth in Section I, 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. (1998), at a time and place to be fixed as provided in Section 10.61, 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.

IT IS FURTHER ORDERED that Respondent shall file an Answer to the allegations against Respondent 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, and pursuant to Section 10.12(a) of the Rules of Practice, 17 C.F.R. � 10.12(a), shall serve two copies of such Answer and of any document filed in this proceeding upon Susan A. Berkowitz, Regional Counsel, or Ann H. Theodore, Trial Attorney, Commodity Futures Trading Commission, Division of Enforcement, 300 South Riverside Plaza, Suite 1600-N, Chicago, Illinois 60606, or upon such other counsel as designated by the Division. If Respondent fails to file the required Answer or fails to appear at a hearing after being duly served, Respondent shall be deemed in default, and the proceeding may be determined against Respondent upon consideration of the Complaint, the allegations of which shall be deemed true.

IT IS FURTHER ORDERED that this Complaint and Notice of Hearing shall be served on Respondent personally or by certified or registered mail forthwith pursuant to Section 10.22 of the Commission's Rules, 17 C.F.R. � 10.22 (1998).

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.

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By the Commission: