Release: #4592-01
For Release: December 20, 2001

OHIO COMMODITY TRADER SETTLES POOL FRAUD ACTION

Consent Order with Government Regulator Finds that Defendant Jeffrey T. Bailey Committed Fraud By Diverting Investor Funds For His Own Use and Permanently Bars Him from Futures and Options Trading

WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today that a federal district court entered an order, by consent, permanently enjoining defendants Jeffrey T. Bailey (Bailey), of Amelia, Ohio, and JMK Capital Management, Inc. (JMK Capital), an Ohio corporation, from further violations of the federal commodities laws, based on his fraudulent operation of a commodity pool and diversion of approximately $371,000 of investor funds for his own uses.

The court's order, filed on December 18, 2001, settles a complaint filed by the CFTC in the United States District Court for the Southern District of Ohio, Western Division on April 12, 2001 (see CFTC News Release 4507-01, April 12, 2001).

Specifically, the court order finds that, from approximately May 1998 to March 2001, Bailey and JMK Capital Management received $619,670 in funds from investors for the purpose of pooling the funds to trade in commodity futures contracts. Bailey only invested $248,000 of the funds provided to him, according to the order, and diverted $371,670 of the $619,670 known to have been provided to him by investors to his own use.

According to the order, Bailey issued statements to investors that displayed exaggerated and fraudulent investment earnings. For example, these investment statements indicated as of January 2001 investors had, collectively, over $1,800,000 in deposits and earnings with Bailey. In actuality, less than $39,000 existed in Bailey's trading account at that time. The order also finds that of the $371,670 of investor funds Bailey diverted for his own uses, he used approximately $290,400 to pay other investors what they believed were large earnings on their investments. He also used the diverted funds for his personal expenses, according to the order.

The consent order finds that Bailey and JMK Capital violated the anti-fraud provisions of the Commodity Exchange Act and permanently enjoins the defendants from further violations, and:

• requires Bailey to pay restitution of $491,100 to investors, and then up to $196,000 as a civil monetary penalty, pursuant to a payment plan; and
• prohibits the defendants from engaging in certain activities in the futures industry on behalf of others or themselves, including soliciting funds, controlling or directing the trading of commodity accounts on behalf of any other persons or entities and from seeking registration with the CFTC.

The United States Attorney for the Southern District of Ohio also filed a criminal information on April 12, 2001, against Bailey arising out of the same facts and charging criminal violations of the CEA. Bailey has pled guilty to those charges and is scheduled for sentencing on January 4, 2002.

Case Contact:
Scott Williamson, Acting Regional Counsel
Central Regional Office
Division of Enforcement
(312) 886-3090

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