Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-02513/USCOURTS-azd-2_12-cv-02513-0/pdf.json

Parties Involved:
Ray Thomas Brown
Defendant
United States Commodity Futures Trading Commission
Plaintiff

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States Commodity Futures Trading

Commission, 

Plaintiff, 

vs.

Ray Thomas Brown, 

Defendant. 

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No. CV-12-2513-PHX-FJM

ORDER

Before the court is plaintiff United States Commodity Futures Trading Commission’s

(“CFTC”) motion for summary judgment (doc. 38), and reply (doc. 42). Defendant did not

respond to the motion and the time for doing so has expired. We may consider defendant’s

failure to respond “a consent to the . . . granting of the motion.” LRCiv 7.2(i). 

Defendant has acknowledged that no “factual or legal issues are genuinely in dispute.”

(doc. 34 ¶ 3(b)). Therefore, the undisputed material facts establish that defendant violated

the antifraud and registration provisions of the Commodity Exchange Act, 7 U.S.C. §§ 6m,

6o (2012) (the “Act”). During the period of January 1, 2010 to November 26, 2012,

defendant engaged in a fraudulent scheme to solicit persons to participate in a purported

commodity pool and to authorize him to trade commodity futures contracts on their behalf.

He convinced more than 200 individuals to deposit by wire transfer and cash deposits

Case 2:12-cv-02513-FJM Document 43 Filed 01/21/14 Page 1 of 3
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approximately $1,163,519.00 to bank accounts under his control. Of this amount, defendant

deposited only approximately $86,000 into commodity pool trading accounts. This amount

was lost in trading. The rest of the funds were used for defendant’s own personal expenses

and to further his fraudulent scheme. Defendant lied about his background, fabricated his

past and present investment performance, disseminated false account statements, and

misappropriated customer funds. He failed to disclose to potential pool participants that he

was not registered with the CFTC and that he was illegally operating a commodity pool. 

The undisputed facts show that defendant, acting as a commodity trading advisor

(“CTA”) and commodity pool operator (“CPO”) violated 7 U.S.C. § 6o(1)(A) and (B) of the

Commodity Exchange Act as asserted in count 1 of the Complaint. Acting as a CPO and

CTA, and with the intent to defraud, defendant directly or indirectly employed a device,

scheme, or artifice to defraud individuals and engaged in transactions, practices or course of

business which operated as a fraud upon individuals by (a) making material

misrepresentations and omissions to prospective pool participants, (b) misappropriating their

funds, and (c) providing them with false and misleading account statements and

misrepresenting the value of the individuals’ accounts. Defendant engaged in such acts by

use of the mails or other means or instrumentalities of interstate commerce. Accordingly,

summary judgment is granted in favor of the CFTC on count 1 of the Complaint.

The undisputed facts also show that defendant engaged in the activities of a CPO

although he was not registered with the CFTC as a CPO, and did not qualify for a registration

exemption, in violation of 7 U.S.C. § 6m. Defendant used the mails or other means or

instrumentalities of interstate commerce to engage in his business as a CPO. Summary

judgment is granted in favor of the CFTC on count 2 of the Complaint. 

The undisputed facts also show that defendant acted as a CTA although he was not

registered with the CFTC as a CTA, and did not qualify for a registration exemption, in

violation of 7 U.S.C. § 6m. Defendant used the mails or other means or instrumentalities of

interstate commerce to engage in his business as a CTA. Summary judgment is granted in

favor of the CFTC on count 3 of the Complaint. 

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Based on defendant’s violations of the Commodity Exchange Act and the likelihood

of future violations, injunctive and monetary remedies are warranted. In addition to

restitution and disgorgement, the Act authorizes the imposition of a civil monetary penalty

of not more than the greater of $140,000 or triple the monetary gain for each violation of the

Act. 7 U.S.C. § 13a-1(c), (d); 17 C.F.R. § 143.8(a)(1)(ii)(D). 

We reject the CFTC’s request to file a second motion for summary judgment on the

issue of damages. The deadline to file dispositive motions has passed. Rule 16 Scheduling

Order (doc. 36, ¶ 10). Nevertheless, the undisputed facts presented in the CFTC’s motion

for summary judgment provide sufficient evidentiary support to decide the appropriate

remedies. 

The undisputed facts show that defendant received approximately $1,163,519.00 in

connection with his commodity pool scheme. He returned approximately $319,396.32 of

participants’ initial payments. Thus, the net loss caused by defendant’s fraudulent scheme

was $844,122.68. The trading accounts managed by defendant sustained losses of

approximately $287,818.50. Therefore, the victims’ total losses due to defendant’s fraud are

$1,131,941.98. An imposition of restitution and disgorgement damages against defendant

in this amount is appropriate. We also impose a civil monetary penalty pursuant to 7 U.S.C.

§ 13a-1(d) in the amount of $140,000.

Therefore, IT IS ORDERED GRANTING the CFTC’s motion for summary

judgment on all counts in the Complaint (doc. 38). IT IS FURTHER ORDERED imposing

restitution and disgorgement damages against defendant in the amount of $1,131,941.98, and

a civil monetary penalty in the amount of $140,000. Finally, IT IS ORDERED

GRANTING the CFTC’s request for permanent injunctive relief, the details of which will

be set forth in a separate final judgment.

DATED this 21st day of January, 2014.

Case 2:12-cv-02513-FJM Document 43 Filed 01/21/14 Page 3 of 3