Release: 4793-03
For Release: June 11, 2003

CFTC SETTLES OPTIONS FRAUD CHARGES WITH CALIFORNIA DEFENDANT

Beverly Hills Resident Ronald G. Scott Permanently Barred From Trading Commodity Futures and Options; Court Orders Scott to Make Refunds to Customers and Pay a Civil Penalty

WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today the settlement of an enforcement action against Ronald G. Scott of Beverly Hills, California, who was charged in a June 2001 CFTC enforcement action with fraudulently offering commodity options contracts to the public as co-principal of Madison Financial Group LLC (see CFTC News Release 4523-01, June 6, 2001). Madison and Scott’s co-principal, Richard A. Cohen, settled earlier with the CFTC (see CFTC News Release 4694-02, September 4, 2002).

The CFTC settlement order of June 6, 2003, finds that, from April 1998 to March 2001, Madison’s employees, at the direction of Scott, fraudulently solicited customers to trade commodity options using numerous factual misrepresentations, including:

• statements that customers would realize large profits from trading commodity options,
• statements that Madison’s performance record on behalf of its customers was better than it actually was, and
• omissions, such as failing to disclose the risk involved in trading commodity options.

The order specifically finds that Scott encouraged his sales staff to “make up a story” when soliciting customers, and directed them to make misrepresentations overstating Madison’s trading record on behalf of its customers. The order finds that during the time period that customers were told that Madison’s customers were making money trading commodity options, approximately 97 percent of all of Madison’s customers suffered losses. The order also finds that Scott failed to supervise diligently the solicitation and handling of customer accounts in violation of CFTC regulations.

The order requires Scott to stop violating the Commodity Exchange Act and orders Scott to reimburse customers up to $810,000 and pay a civil monetary penalty of up to $110,000.

Scott consented to the issuance of the Order without admitting or denying the order’s findings or the allegations contained in the underlying complaint.

A copy of the order may be found at www.cftc.gov.

The following Division of Enforcement staff were responsible for this case: Louis Traeger, James Andreozzi, and Jack Barrett.

Media Enforcement Contact:
Jack Barrett
Regional Counsel
CFTC Division of Enforcement
(310) 443-4700

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