Release: 5107-05
For Release: August 8, 2005

HAWAIIAN RESIDENT BARRY SCHOTZ ORDERED TO PAY $4.5 MILLION IN SETTLEMENT OF U.S. COMMODITY FUTURES TRADING COMMISSION FRAUD ACTION

Court Also Enjoins Los Angeles-Area Resident Randolph Gale in Same Commodity Pool Fraud Scheme

WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today that the United States District Court for the Central District of California issued consent orders settling the CFTC’s charges in a commodity pool fraud case brought against Barry Schotz of Kilauea, Hawaii, and Randolph Gale of Hidden Hills, California.

The two consent orders stem from a CFTC complaint filed on October 27, 2004 (See CFTC News Release 5017-04, Nov. 12, 2004) alleging that, from about August 2003 to October 2004, Schotz fraudulently operated a commodity pool called the Bear Invest Fund (Bear pool), and Gale became associated with him in the operation of the pool to solicit funds without being registered with the CFTC. Gale was not charged with fraud.

In the Schotz consent order, the court found that Schotz fraudulently solicited and accepted approximately $5 million for the Bear pool from at least 51 pool participants, most of whom resided in and around Los Angeles County, California. The court further found that Schotz’s futures trading with the Bear pool’s funds consistently lost money, while Schotz falsely reported to pool participants that his trading was highly profitable and that the Bear pool was making money. The order also finds that Schotz commingled customer funds with his personal funds, misappropriated approximately $1.7 million of customer funds that he used for personal expenses, and failed to provide pool disclosure documents to pool participants.

The court ordered Schotz to make restitution to customers in the amount of $2.9 million, pay a civil monetary penalty of $1.6 million, and enjoined him from engaging in commodity pool fraud and from violating other provisions of the Commodity Exchange Act and CFTC regulations. Schotz consented to the entry of the court’s order without admitting or denying the allegations of the complaint or the principal findings in the consent order.

In the Gale consent order, the court found that Gale, who deposited his own funds into the Bear pool, solicited 34 of the pool’s participants without being registered with the CFTC, raised an alert with compliance personnel at the brokerage firm holding the pool’s account after Schotz confessed his trading losses, caused Schotz to return money to the 34 pool participants Gale had solicited, and then made up the balance of those participants’ losses from his own funds. The court enjoined Gale from engaging in activities relating to pool solicitation, from trading futures for others, and from seeking future registration with the CFTC.

Gale consented to the entry of the court’s order without admitting or denying the allegations of the complaint.

Schotz Pleaded Guilty to Criminal Fraud Violations Based on Pool Fraud

Schotz, who was previously convicted of fraud in 1994 and served five years in federal prison, recently pleaded guilty in the United States District Court for the Northern District of Illinois to charges of wire fraud arising out of the allegations in the CFTC complaint. He has been released on bond while he awaits sentencing before Judge Charles Norgle in Chicago.

The following CFTC Division of Enforcement staff are responsible for this case: Louis Traeger, Michael Tallarico, William Janulis, Cynthia Cannon, Scott Williamson, and Rosemary Hollinger.

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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious internet websites.

You may contact the CFTC at 1-866-FON-CFTC (1-866-366-2382) visit us at our Customer Protection web page: (www.cftc.gov/cftc/cftccustomer.htm), or fill out our Internet Report Form identifying your concerns (www.cftc.gov/enf/enfform.htm).

In addition, the CFTC publishes a series of Consumer Advisories at http://www.cftc.gov/cftc/cftccustomer.htm#advisory alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.

Media Contacts
Alan Sobba
(202) 418-5080
Dennis Holden
(202) 418-5088
CFTC Office of External Affairs, Washington, D.C.

Staff Contacts
Rosemary Hollinger
Associate Director
Regional Counsel
CFTC Division of Enforcement
(312) 596-0520

Joan Manley
Deputy Director
CFTC Division of Enforcement
202) 418-5356

Related Documents
Schotz Order
Gale Order