March 22, 2016

Federal Court Orders Former Alabama Resident John David Stroud and His Companies to Pay More than $4.7 Million in Restitution and a Civil Monetary Penalty for Committing Commodity Pool Fraud and Misappropriation

The Defendants Stole over $2.3 Million from Pool Participants and Lost More than $1.1 Million Trading

In a Related Criminal Action, Stroud Was Sentenced to 10 Years in Prison and Required to Pay $2,148,273.61 in Restitution to His Victims

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that newly assigned Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa, sitting by designation, entered a summary judgment Order against Defendants John David Stroud and his companies, Stroud Capital Management, LLC, TS Capital Partners, LLC, and TS Capital Management, LLC. Stroud was a commodities trader operating out of Auburn, Alabama, prior to his incarceration.

The Order, entered on March 1, 2016, requires the Defendants jointly to pay restitution of $2,379,923.27 and a civil monetary penalty of $2,343,323.27. The Order also imposes permanent trading and registration bans against the Defendants and prohibits them from further violating the Commodity Exchange Act (CEA), as charged.

The court’s Order stems from a CFTC Complaint filed four years ago that charged Stroud and his companies with fraud and misappropriation in operating two commodity pools (see CFTC Press Release 6195-12, March 7, 2012).

According to the Order, the Defendants accepted $4,888,442.43 from individuals to participate in their commodity pools, misappropriated $2,343,323.27 of the pool participants’ funds, and lost $1,175,180.10 trading. Nevertheless, on multiple occasions, Stroud falsely represented to prospective and actual pool participants that his trading was profitable. Furthermore, the Order finds that when confronted by pool participants about certain of his misrepresentations, Stroud provided false bank statements to TS Capital Management employees, who were also pool participants, showing a highly inflated version of the pool account balance that was, in reality, a fabricated version of Stroud’s personal bank account.

Criminal Action

In a related criminal action, on August 23, 2013, Stroud pleaded guilty to one count of securities fraud. On November 18, 2013, Stroud was sentenced to 10 years imprisonment and ordered to pay $2,148,273.61 in restitution to his victims (see State of Alabama v. Stroud, Case No. 43-CC-2012-000599).

The CFTC cautions victims that restitution orders may not result in the recovery of 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 CFTC appreciates the assistance of the Alabama Securities Commission, the National Futures Association, and the U.S. Attorney’s Office for the Middle District of Alabama.

CFTC Division of Enforcement staff members responsible for this action are Stephanie Reinhart, Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, and Rosemary Hollinger.

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CFTC’s Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online. 

Media Contact
Dennis Holden
202-418-5088
 

Last Updated: March 22, 2016