Release: #4164-98 (97 Civ. 3119)
For Release: July 8, 1998
NEW YORK COURT FINDS THAT AVCO FINANCIAL CORP. AND ANTHONY VARTULI DEFRAUDED OVER 1,000 CUSTOMERS IN CONNECTION WITH THE SALE OF FUTURES TRADING COMPUTER SOFTWARE, AND DIRECTS THEM TO DISGORGE $4.1 MILLION
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced today that the Honorable John F. Keenan of the U.S. District Court for the Southern District of New York, after a two-week bench trial earlier this year, issued a decision on June 30, 1998, against AVCO Financial Corp. (AVCO) and its president Anthony Vartuli, both of Greenwich, Connecticut.
In its decision, the court found AVCO and Vartuli liable for fraudulently promoting their futures trading software and directed them to disgorge $4.1 million in ill-gotten gains. The judge also found that AVCO and Vartuli gave commodity trading advice through their software and thus were required to be registered with the CFTC as commodity trading advisors.
Judge Keenan dismissed the charges brought against a third defendant, J. Michael Gent, of Tunnel Hill, Georgia, the developer of the trading program, finding insufficient evidence of his control of AVCO and of his participation directly in the fraudulent conduct.
The court found that AVCO and Vartuli violated the Commodity Exchange Act (CEA) and the CFTC's regulations by fraudulently soliciting customers to purchase their software program through false representations that the program had generated large profits, overwhelmingly picked winning trades, involved little or no risk of loss, and had a profitable track record in actual commodity futures trading. Judge Keenan found that these false representations were made "in connection with" futures trading within the meaning of the CEA and that customers relied on these misrepresentations in purchasing the defendants' program, resulting in $4.1 million in sales revenue for the defendants. The court also found that AVCO met the statutory definition of a "commodity trading advisor" and provided personalized trading advice.
The court indicated that it would permanently enjoin AVCO and Vartuli from future violations of the CEA and Commission regulations, directed AVCO and Vartuli to disgorge $4.1 million dollars in ill-gotten customer fees, and imposed a civil monetary penalty of $5,000 on both AVCO and Vartuli.
CFTC Director of Enforcement Geoffrey Aronow commented:
"This court's carefully-reasoned decision reaffirms the Commission's statutory mandate to pursue those who provide fraudulent commodities trading advice for profit, whatever the media they choose to use to transmit their misinformation. Whether people get their advice face-to-face, by telephone, by fax, or by computer, they must always be on guard against promises that seem too good to be true."