Washington, D.C. — The Commodity Futures Trading Commission today announced the U.S. District Court for the Central District of California entered, on August 22, a default order for a permanent injunction, monetary sanctions, and equitable relief against defendants Daniel Adam Hewko (Hewko) of Irvine, California and Main & Prospect Capital, LLC (MPC) of Suisan, California. 

The default order resolves the CFTC’s claims against Hewko and MPC in the CFTC action filed against Hewko, his father, Daniel Hewko, and MPC on November 13, 2019  alleging, among other things, fraud, misappropriation of investor funds, and failing to register with the CFTC as an associated person of a commodity pool operator. [See CFTC Press Release No. 8078-19] A consent order resolving the CFTC action against Daniel Hewko was previously entered on June 7. [See CFTC Press Release No. 8546-22] 

The order requires Hewko and MPC to pay $1,906,395 in restitution to victims of the fraudulent scheme and to pay a $5.7 million civil monetary penalty. The order also permanently prohibits them from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged, and imposes a permanent registration and trading ban. 

Case Background 

The order finds that in approximately August 2014, Hewko and MPC began seeking investments into a pooled investment vehicle operated by MPC and marketed to prospective investors as the Global Opportunity Fund (Fund). From September 2014 to November 2014, MPC transferred more than $1.1 million collected from the investors into a futures trading account with a futures commission merchant (FCM). In December 2014, the funds from that FCM were transferred to an account at another FCM where they remained until approximately the summer of 2016. The accounts were used to conduct limited trading of futures contracts, including crude oil and E-mini S&P futures contracts, both of which were traded on designated contract markets. 

The order also finds Hewko and MPC began issuing quarterly statements in approximately January 2016; however, all investment returns claimed in account statements provided from the fourth quarter of 2015 through third quarter of 2018 were false. While the Fund suffered losses during this period, investors received statements indicating returns with wide ranging percentages of false growth. Hewko and MPC knew these statements were false as the Fund never earned any investment gains. 

The order further finds Hewko and MPC did not use investor funds in the manner represented to investors, and instead misappropriated funds for the benefit of Hewko, his family, and unrelated companies he owned or controlled.  

Further, the order finds that Hewko was the owner of MPC, held himself out to investors as MPC’s manager, signed documents on behalf of the company, and opened and controlled the futures trading account in MPC’s name. Hewko failed to register with the CFTC as an associated person of a commodity pool operator. MPC also failed to register with the CFTC as a commodity pool operator. 

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable. 

The Division of Enforcement staff responsible for this matter are Karin Roth, Michael Cazakoff, R. Stephen Painter, Jr., Lenel Hickson, Jr. and Manal Sultan. 

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CFTC’s Commodity Pool Fraud Advisory 

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which provides information about a type of fraud involving individuals and firms, often unregistered, offering investments in commodity pools. 

The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that company. A company’s registration status can be found using NFA BASIC. 

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.