IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES COMMODITY )

FUTURES TRADING COMMISSION, )

Plaintiff, )

)

v. ) 07 C 3598

)

LAKE SHORE ASSET MANAGEMENT )

LIMITED, et al., )

Defendants. )

MEMORANDUM AND ORDER

The court held an evidentiary hearing in connection with the CFTC’s motion for a

preliminary injunction based on Lake Shore Limited’s alleged fraud. The parties’ proposed

findings of fact and conclusions of law are before the court. For the following reasons, and as set

forth more fully below, the CFTC’s motion for a preliminary injunction is granted in part and

denied in part. 

I. Findings of Fact

A. The Parties

1. Plaintiff the Commodity Futures Trading Commission (“CFTC”) is an independent

federal regulatory agency. (First Amended Complaint at ¶ 11).

2. Defendant Lake Shore Asset Management Limited (“Lake Shore Limited”) is a Bermuda

corporation that was formed on September 12, 2006. (Amended Decl. of P. Baker, Def.

Ex. 5, Tab A). Lake Shore Limited became registered with the CFTC as a CTA and CPO

to do business within the United States on January 17, 2007. (Amended Decl. of P.

Baker, Def. Ex. 5, at ¶ 3; H. Johnson, Tr. at 143:22-23; Answer at ¶¶ 8, 16). It is a

member of the NFA and registered with the CFTC to operate as a commodity pool

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operator (“CPO”) and commodity trading advisor (“CTA”). (Plt. Ex. 15, Brodersen ¶ 2;

Stipulation, Tr. 370).

B. Other Relevant Individuals

3. Laurence Rosenberg is a principal of Lake Shore Limited and a former Chairman of the

Chicago Mercantile Exchange. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 14). Mr.

Rosenberg resides in the United States and his professional reputation is of significant

value to Lake Shore Limited. (Id. at ¶¶ 5 and 14). He is also a director of Lake Shore

Funds I, II, III, and IV, but does not do any trading for the Funds and has no day to day

involvement in the Funds or the operation of any of the Lake Shore Group entities.

4. Philip Baker is the Managing Director, Principal and President of Lake Shore Limited

(M. Spear, Tr. 20:13-14; Plt. Ex. 4 at 32; Plt. Ex. 5 at 1-3; Def. Ex. 5 at ¶ 1). Mr. Baker is

also the co-founder and managing partner of the Lake Shore Group of Companies and

Lake Shore Institutional & Dealer Relations. (Plt. Ex. 4 at 32; Plt. Ex. 6 at CFTC Bates

100 06 0024; Ex. 9 at CFTC Bates 299 02 0017; M. Spear, Tr. 34:8-10; Def. Ex. 11, Def.

Ex. 5 at ¶ 1). In addition, Mr. Baker is the President and Secretary of Lake Shore

Alternative Financial Asset Ltd. (Plt. Ex. 14 at 2; Plt. Ex. 20 at CFTC Bates 105 00 0022

and 0026) and the Lake Shore Alternative Financial Asset Account (Plt. Ex. 20 at CFTC

Bates 105 08 0014).

5. Nicholas Eveleigh was the Vice President of Operations and the compliance contact for

the Lake Shore Group. (M. Spear, Tr. 31:3-4 and 22-23).

6. For regulatory purposes, an individual may be affiliated with multiple firms. (H. Johnson

Tr., 159:11-20; Brodersen Tr. 238:23-25). For regulatory purposes, the actions of an

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individual who is affiliated with multiple firms do not necessarily carry over to the other

firms. (H. Johnson, Tr. 159:21-23).

C. The Witnesses

7. Mary Beth Spear is an investigator with the CFTC’s Division of Enforcement. (M. Spear,

Tr. 17:19-20). Her position requires her to conduct investigations to ensure compliance

with the Commodity Exchange Act (“the Act”) and the CFTC’s regulations. (Id.) She

has worked for the CFTC for over 20 years. (M. Spear, Tr. 17:16-18:1). Ms. Spear

testified on behalf of the CFTC. Lake Shore Limited also called Ms. Spear as a witness

in an effort to lay foundation for many of its exhibits.

8. The National Futures Association (“NFA”) is a registered futures association under 7

U.S.C. § 21. It is a not for profit membership corporation that serves as the commodity

futures and options industry’s self-regulatory organization. The NFA conducts audits and

investigations of NFA member firms to ensure compliance with NFA rules and CFTC

regulations under 7 U.S.C. § 21. It also has delegated authority from the CFTC to register

individuals and entities required to be registered with the CFTC under the Act. 7 U.S.C.

§ 7(o).

9. Heather Johnson, a Supervisor in NFA’s Compliance Department, testified through

affidavit (Ptf. Ex. 13) and from the witness stand. She performed a detailed analysis of

all Lake Shore accounts held at Sentinel Management Group, Inc. (“Sentinel”), which is a

registered futures commission merchant (“FCM”).

10. John Brodersen, an Associate Director in the Compliance Department of the NFA,

testified through affidavit (Plt. Ex. 15) and from the witness stand. 

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11. Both the CFTC and Lake Shore Limited called Eric Bloom, Sentinel’s President, to

testify. 

D. The Lake Shore Group of Companies

The Companies

12. Lake Shore Limited is one of the companies associated with the Lake Shore Group of

Companies (“Lake Shore Group”). (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 3). 

More specifically, Lake Shore Limited’s legal name is “Lake Shore Group of Companies

Inc., Ltd.” (Plt. Ex. 5 at 223 07 0234). Lake Shore Group and associated companies have

been operating businesses since 1994. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 2).

Lake Shore Group offers investment funds and managed accounts which trade in

commodity futures contracts. (Id.).

13. With the exception of one investment fund established in the United States in April 2007

(Lake Shore IV – U.S.), Lake Shore Group has not marketed to or accepted any residents

of the United States, its territories or possessions in any of Lake Shore Group’s trading

programs, and all of its investment funds are located outside of the United States. (Id.)

14. Lake Shore Asset Management Inc. (“Lake Shore Inc.”) is also affiliated with the Lake

Shore Group of Companies and is registered separately with the NFA. (J. Brodersen, Tr.

258:6-25 and 261:4-7).

15. Lake Shore Inc. is the firm name for Lake Shore Alternative Investment, which is 100%

owned by Senior Management of Lake Shore Asset Management. (Plt. Ex. 8 at CFTC

Bates 299 02 0014).

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16. Lake Shore Limited is the reorganized version of Lake Shore Inc. (J. Brodersen, Tr.

258:9-11).

17. Lake Shore Alternative Financial Asset Ltd. is another company affiliated with the Lake

Shore Group. Mr. Baker (in his capacity as President and Secretary of Lake Shore

Alternative Financial Asset Ltd.) and John Kurgan (the Chief Executive Officer of Lake

Shore Alternative Financial Asset Ltd.) were authorized to execute money transfers at

Sentinel on behalf of Lake Shore Alternative Financial Asset Ltd. (Plt. Ex. 14, p. 2; Plt.

Ex. 20 at CFTC Bates 105 08 0011).

18. Lake Shore Alternative Financial Asset Account is yet another company associated with

the Lake Shore Group. Mr. Baker is its President and Secretary, and Mr. Kurgan is the

Chief Executive Officer. (Plt. Ex. 20 at CFTC Bates 105 08 0014).

Interrelationship Between Lake Shore Limited, the Lake Shore Group, and Mr. Baker

19. Lake Shore Group’s promotional materials refer to “Lake Shore,” the Lake Shore Group,

Lake Shore Inc., and Lake Shore Limited interchangeably. The Lake Shore Group

PowerPoint presentation or “Pitch” which was produced to the CFTC by Mr. Eveleigh

contains a page entitled “History of the Portfolio Management Company.” On that page,

Lake Shore Group states that it has offices in Chicago, London, Geneva, Bermuda, and

Hong Kong, and that Lake Shore Limited is a reorganization of Lake Shore Asset

Management Inc. (Plt. Ex. 4 at 4) (“Lake Shore Asset Management Inc. (reorganization

in 2006 to Lake Shore Asset Management Limited, Bermuda) founded in Chicago,

Illinois in 1993”). It also refers repeatedly to “Lake Shore.” (Plt. Ex. 4, passim). 

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20. In addition, the Pitch represents that the Lake Shore Group of Companies’ product range

includes funds operated and managed by “Lake Shore Asset Management” and thirdparty structured products “[m]anaged by Lake Shore Asset Management.” (Id. at 3). It

also explicitly states that Lake Shore Limited is the trading manager for Lake Shore’s

funds as well as a CTA and CPO. (Id. at 10).

21. A document on Lake Shore Group’s letterhead entitled “Qualitative Firm Evaluation &

Due Diligence Lake Shore Asset Management Limited” states that Lake Shore Limited’s

web address is www.lakeshorefunds.com. (Plt. Ex. 9; Plt. Ex. 15, J. Brodersen Aff. at ¶

4).

22. Lake Shore Inc. and Lake Shore Limited were both located at 875 N. Michigan Ave.,

Suite 1562, Chicago, Illinois. (Plt. Ex. 2; Plt. Ex. 8). Lake Shore Group letterhead states

that it has offices in Chicago without providing any other address. (See e.g., Plt. Ex. 6 at

CFTC Bates 100 06 0015).

23. Lake Shore Limited/Lake Shore Group’s management personnel are located in Chicago. 

(Plt. Ex. 4 at 23). They also have administrative/IT/operations staff, and execution staff

in Chicago. (Id.).

24. Lake Shore Limited and Lake Shore Inc.’s printed materials relating to the Lake Shore

Alternative Financial Asset Funds are on Lake Shore Group stationery and contain the

Lake Shore Group’s logo. (Plt. Exs. 4, 6, 8, 9). 

25. Information and performance results for the funds managed and advised by Lake Shore

Limited are available on the Lake Shore Group’s website. (Plt. Ex. 15, J. Brodersen Aff.

at ¶ 6).

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26. Mr. Baker is the Managing Director, Principal and President of Lake Shore Limited (M. 

Spear, Tr. 20:13-14; Plt. Ex. 4 at 32; Plt. Ex. 5 at CFTC Bates 223 07 0236) and the

co-founder and managing partner of the Lake Shore Group of Companies and Lake Shore

Institutional & Dealer Relations. (Plt. Ex. 4 at 32; Plt. Ex. 6 at CFTC Bates 100 06 0024;

Plt. Ex. 9 at CFTC Bates 299 02 0017; M. Spear, Tr. 34:7-10; Def. Ex. 11, Second

Declaration of Philip Baker, at ¶1). 

27. Lake Shore Limited’s Due Diligence, which is dated June 2007, lists Mr. Baker as Lake

Shore Limited’s contact person. (Plt. Ex. 5 at CFTC Bates 223 07 0233). 

28. Mr. Baker holds the primary responsibility of managing Lake Shore Limited and the Lake

Shore Group of Companies’ overall international business development, operations, sales

and marketing. (Plt. Ex. 4 at 32).

29. Lake Shore’s Alternative Investment Due Diligence Questionnaire dated September 2005

that was provided to the Bank of Montreal–Ireland provides that Philip J. Baker is the

Managing Partner of Lake Shore Asset Management Inc. (Plt. Ex. 8 at CFTC Bates 299

02 0003). It also lists Mr. Baker as the person who prepared and reviewed the

questionnaire on behalf of Lake Shore Inc. (J. Brodersen, Tr. 274:4-6; Plt. Ex. 8 at

CFTC 299 02 0003).

30. Lake Shore Limited solicited customers through dealers affiliated with the Lake Shore

Group. (M. Spear, Tr. 50:19-24).

31. The Pitch that was produced to the CFTC by Mr. Eveleigh describes Lake Shore Limited

as part of the Lake Shore Group. (Plt. Ex. 4 at 2). Mr. Eveleigh also produced

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organizational charts and various offering memoranda for the Lake Shore Alternative

Financial Asset Funds. (Plt. Ex. 4 at 2; M. Spear, Tr. 24:11-15 and 25:21-24).

32. Mr. Rosenberg told NFA staff that the Lake Shore Group consists of Lake Shore Limited. 

(Plt. Ex. 15, J. Brodersen Aff. at ¶ 8). This is consistent with the organizational chart

contained in the Pitch.

33. Lake Shore Group/Lake Shore Limited operate four foreign investment funds, Lake Shore

Alternative Financial Asset I, Lake Shore Alternative Financial Asset II, Lake Shore

Alternative Financial Asset III, and Lake Shore Alternative Financial Asset IV. 

(Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 6). 

34. The Pitch also shows that Lake Shore Limited provides or manages all of the Lake Shore

Group’s products. (Plt. Ex. 4 at 10 and 4). Specifically, Lake Shore Limited provides 7

products: Lake Shore Alternative Asset Account I, Lake Shore Alternative Asset

Account II, Lake Shore Alternative Financial Asset Funds I, II, II and IV and Lake Shore

Alternative Financial Asset Yen Fund. (Plt. Ex. 4 at 3).

35. Mr. Brodersen reviewed a press release dated January 29, 2007. (Plt. Ex. 15, J.

Brodersen Aff. at ¶ 5 and exhibit A to affidavit). The press release was from Lake Shore

Limited, was on Lake Shore Group letterhead, and referred to www.lakeshorefunds.com. 

Id. Mr. Brodersen testified that the press release does not distinguish between Lake

Shore Group and Lake Shore Limited. (J. Brodersen, Tr. 166:4-10). It announced the

launch of Fund IV, and stated “in its 13 year history, Lake Shore’s flagship program has

generated a 28.27 percent return.” (J. Brodersen, Tr. 166:4-6; Plt. Ex. 15, J. Brodersen

Aff. at ¶ 5 and exhibit A to affidavit ). It also noted that Lake Shore “is a member of the

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NFA and is regulated by the CFTC.” (J. Brodersen, Tr. 166: 1-3; Plt. Ex. 15, J.

Brodersen Aff. at ¶ 5 and exhibit A to affidavit). 

The Lake Shore Funds

36. The court prepared a summary chart, which is attached hereto as Exhibit 1. This chart is

drawn directly from the exhibits and depicts the organization of the funds at the FCM

level. Specifically, it is a combination of and drawn from Plt. Ex. 15 (Mr. Brodersen’s

declaration and the accompanying exhibits) and Plt. Ex 4 at p.3 (the Pitch). In the

interests of simplicity, however, the court omitted the details for the Yen funds.

37. Lake Shore represents that it has a total of $1.05B under management. Lake Shore Fund I

and Lake Shore Fund II consist of direct managed accounts (listed as segregated managed

accounts or separately managed accounts (“SMAs”) on Lake Shore’s materials) and

trading accounts, while Lake Shore Fund III and Lake Shore Fund IV consist of trading

accounts only. (Plt. Ex. 15, J. Brodersen Aff., exhibit B attached to affidavit). 

38. Lake Shore Alternative Financial Asset Fund I, Lake Shore Alternative Financial Asset

Fund II, and Lake Shore Alternative Financial Asset Fund III are organized in the Turks

and Caicos Islands. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 6).

39. Lake Shore Alternative Financial Asset Fund IV is organized in the British Virgin

Islands. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 6).

40. Clients invest in a specific investment fund (e.g., Lake Shore Alternative Financial Asset

Funds I, II, III, or IV). Their money is deposited in accounts at custodian/sub-custodian

FCMs used for trading activities which are operated by that fund. According to the fact

sheets for all of the Lake Shore Alternative Financial Asset Funds, Lake Shore funds

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were trading as of January of 1994 (Lake Shore Alternative Financial Asset Fund I and

Lake Shore Alternative Financial Asset Fund Yen Fund, which both had the new 5% risk

model introduced in 2003), January of 2005 (Lake Shore Alternative Financial Asset

Fund II and Lake Shore Alternative Financial Asset Fund Yen Fund Class II), May of

2006 (Lake Shore Alternative Financial Asset Fund III and Lake Shore Alternative

Financial Asset Fund Yen Fund Class III), February of 2007 (Lake Shore Alternative

Financial Asset Fund IV), and May of 2006 (Lake Shore Alternative Financial Asset

Fund IV Class E). (Plt. Ex. 19).

41. Lake Shore Alternative Financial Asset Fund IV U.S., LLC was formed on April 17,

2007, as an Illinois limited liability company. (Amended Decl. of P. Baker, Def. Ex. 5,

Tab B.) Fund IV–U.S. has a single United States investor (Mr. Stoltz) who invested on

May 8, 2007. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 4). 

42. Fund IV–U.S. invested in Lake Shore Fund IV (which consists of Lake Shore Alternative

Financial Asset Fund IV). (M. Spear, Tr. 114:9-11; J. Brodersen, Tr. 248:3-4). The

money invested by Mr. Stoltz was deposited at Sentinel and transferred from Fund

IV–U.S. to the Lake Shore Alternative Financial Asset Fund IV account at Sentinel in

Sentinel’s capacity as an FCM. (J. Brodersen Tr. 248:12-15).

43. Lake Shore Alternative Financial Asset Funds I, II, III, and IV are separate legal entities

with separate boards of directors. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 6).

44. Man Financial London (“Man”), Lehman Brothers London (“Lehman”), and Fimat

London (“Fimat”) maintain the trading accounts for the Lake Shore Alternative Financial

Asset Funds. (M. Spear, Tr. at 77:7-19).

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45. There is no evidence that anyone ever complained about the Lake Shore accounts to

Fimat, Man, or Lehman Brothers between 2002 and up to the time of the asset freeze

imposed by this court (which has since been vacated) and the continuing asset freeze

imposed by the NFA pursuant to a Member Responsibility Action. (J. Brodersen, Tr.

251:25-252:23).

46. Sentinel is the cash manager and the subcustodian for the Lake Shore Alternative

Financial Asset Funds. (M. Spear, Tr. 70:14-16; H. Johnson, Tr. 133:8-10; Plaintiff. Ex.

4 at 0012). No one has ever complained to Sentinel regarding the Lake Shore accounts. 

(E. Bloom, Tr. 358:2-6). The Bank of New York is the custodian for the Lake Shore

Alternative Financial Asset Funds. Thus, the Bank of New York, as custodian, and

Sentinel, as subcustodian, maintain custody of the funds. (M. Spear, Tr. 77:2-6).

47. A fund flow chart for Fund IV depicts Lake Shore Limited as the trading manager for

Fund IV. (Plt. 4 at 10). Lake Shore Alternative Financial Asset’s fact sheets for Lake

Shore I, Lake Shore II, Lake Shore III, and Lake Shore IV dated “05/07” state that the

respective funds are “managed by Lake Shore Asset Management Limited which is a

Commodity Trading Advisor (CTA) and Commodity Pool Operator (CPO) registered

with the CFTC in the U.S. and is a member of the National Futures Association.” (Plt.

Ex. 19; see also Plt. Ex. 4 at 5). The fact sheets are on Lake Shore Group of Companies

letterhead and state that they were issued by “Lake Shore Group of Companies Inc.,

Limited.” (Id.)

48. The Confidential Explanatory Memorandum for Lake Shore Alternative Financial Asset

Fund IV Ltd. states that Lake Shore Limited is the investment manager and investment

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advisor, “has sole authority and responsibility for the investment of the Fund’s assets,”

and researches, identifies, and monitors possible investments of the Fund.” (Plt. Ex. 6 at

CFTC Bates 100 06 0023). 

49. Lake Shore Limited’s Due Diligence dated September of 2006 states that Lake Shore

Limited is the Investment Advisor for the Lake Shore Group of Companies. (Plt. Ex. 9 at

CFTC Bates 299 02 0016). Similarly, the Confidential Explanatory Memorandum for

Fund IV dated February of 2007 state that Lake Shore Limited is the Investment Manager

and Investment Advisor. (Plt. Ex. 6 at CFTC Bates 100 06 0021). In addition, as noted

above, the Pitch explicitly states that Lake Shore Limited is the trading manager for Lake

Shore’s funds as well as a CTA and CPO. (Plt. Ex. 4 at 10).

50. Mr. Baker testified via declaration that Lake Shore Group intended Lake Shore Limited to

act as the Lake Shore Alternative Financial Asset Funds’ investment advisor, but this plan

was not carried out as a result of this action and a parallel action by the National Futures

Association. (Amended Decl. of P. Baker, Def. Ex. 5 at ¶ 9). This action and the NFA

action were filed in June of 2007. Mr. Baker’s statement that Lake Shore Limited never

acted as the funds’ CTA due to actions occurring in late June of 2007 is at odds with

numerous Lake Shore documents which predate the institution of this action and the

separate NFA action. Moreover, as outlined above, numerous Lake Shore documents

clearly state that Lake Shore Limited is the CTA for the Lake Shore Alternative Financial

Asset Funds. The court declines to credit Mr. Baker’s unsupported assertion because it is

inconsistent with multiple documents which predate this action and is not credible given

the lack of any supporting detail or explanation.

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The Sentinel Accounts 

51. As noted above, funds own accounts that are deposited with them and the monies in the

accounts are deposited at FCMs. Thus, Lake Shore Limited is not the named owner of

the accounts at the FCMs. (J. Brodersen, Tr. 249:2-5, 250:3-7; Def. Exs. 1, 2, 3 & 4). 

52. Lake Shore Limited maintains 35 accounts at Sentinel under the name Lake Shore

Alternative Financial Asset Ltd. (Plt. Ex. 10; Plt. Ex. 13 at ¶¶ 8, 12; M. Spear, Tr. 57:1-

3; H. Johnson, Tr. 134:2-15). 

53. There is no direct trading at the fund level as the fund is a client of the account. (Plt. Ex.

5 at CFTC Bates 223 07 0238). In other words, the money in the trading accounts and is

traded from those accounts, and the respective funds own the trading accounts. This

means that a trading advisor or pool operator cannot hold accounts in their own names

and Lake Shore Limited itself, as an entity, has no authority to withdraw assets held with

the custodians of the Lake Shore Alternative Financial Asset Funds. (M. Spear, Tr.

71:20-22; J. Brodersen, Tr. 249:6-8, 250:8-11).

54. Lake Shore Limited does not receive customer funds, but instead these funds go through

the Bank of New York to Sentinel. (M. Spear, Tr. 71:23 – 72:18). 

55. Principals and employees of Lake Shore Limited were authorized to transfer funds in all

of Lake Shore’s accounts at Sentinel from at least June 28, 2001. (Plt. Ex. 14 at 1, 2; E.

Bloom, Tr. 292:7-17). Mr. Baker and Mr. Eveleigh, among others, are authorized to

transfer funds from the 35 Sentinel accounts. (Plt. Exs. 14, 20; H. Johnson, Tr. 153:10-

154:11). 

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56. The Transfer Authorization form prepared by Mr. Eveleigh and maintained by Sentinel

for the Lake Shore Limited accounts does not list specific account names or numbers but

instead states, “Lake Shore (all accounts).” (Plt. Ex. 14 at 1; Plt. Ex. 20). Each of the

accounts at Sentinel are thus under the control of the same people.

57. The initial Lake Shore account at Sentinel was opened in July 2001 and was afterward

entitled Lake Shore Alternative Financial Asset Limited. (E. Bloom, Tr. 287:10-290:15; 

Plt. Ex. 20). Lake Shore opened several additional accounts at Sentinel but because all of

the accounts had the same owner, new account opening documents were not required. (E.

Bloom, Tr. 290:21-24; Plt. Ex. 20). 

58. The Lake Shore Alt. Financial Asset Fund IV US, LLC–Income account at Sentinel, was

opened on April 9, 2007 and funded on May 3, 2007 with $1,000,000. (Plt. Ex. 13 at ¶¶

12, 13; H. Johnson, Tr. 134:7-21). The $1,000,000 was wire transferred from Mark

Stoltz, a U.S. citizen, for the benefit of Lake Shore. (Plt. Ex. 13 at ¶ 19; H. Johnson, Tr.

136:9-13). On May 14, 2007, $1,000,000 was transferred out of Lake Shore's U.S.

Income account into another Lake Shore account, Lake Shore Alternative Fund IV

Ltd.–Trading. (Plt. Ex. 13 at ¶ 19; H. Johnson, Tr. 136:13-21). 

59. Ms. Johnson noted that seven transfers totaling $2,107,532.96 were made between Lake

Shore Limited’s various Sentinel accounts in June of 2006. (Plt. Ex. 13 at ¶¶ 20-21). 

Based on her review of the documents, Ms. Johnson concluded that monies were being

transferred from Lake Shore Alternative Financial Asset I, II, and III to IV. She opined

that this suggested that Lake Shore did not treat Lake Shore Alternative Fund IV-Trading

as independent from the other accounts. (Plt. Ex. 13 at ¶ 21; H. Johnson, Tr. 139:6-10). 

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It is possible that the transfers were legitimate, but Lake Shore Limited offered no

evidence explaining why the transfers were made. 

60. In response to questions from Lake Shore Limited’s counsel, Mr. Brodersen testified that

a transfer of assets between two funds could be consistent with a “fund of funds”

investment, an investor’s decision to change its investment to a different fund, or a

feeder fund concept. (J. Brodersen, Tr. 244:18-20; 244:21–245:3; 247:2-11). No

evidence, documentary or otherwise, supports a finding that the transfers were actually

made for any of these reasons. There is no evidence that indicates why the funds were

transferred.

61. The funds of the one known U.S. investor were initially deposited into an account at

Sentinel in the name of Lake Shore Alternative Financial Asset Fund IV US LLC–

Income. Eleven days later, these funds were transferred to the Lake Shore Alternative

Fund IV Ltd. Account. (Plt. Ex. 15, J. Brodersen Aff. at ¶ 36). There is no account at any

of the trading FCMs in the name of Lake Shore Alternative Fund IV–US. (Plt. Ex. 15, J.

Brodersen Aff. at ¶¶ 26, 30, 31). 

62. When pool participants add funds to Lake Shore Alternative Financial Asset Fund IV,

they notify Lake Shore Limited. (Plt. Ex. 6 at CFTC Bates 100 86 0042). This indicates

that Lake Shore Limited is soliciting and accepting funds for the purpose of trading

through Fund IV. (J. Brodersen, Tr. 243:7-13). 

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The Trading Accounts 

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63. As noted above, Lake Shore Limited’s trading accounts are at Man, Lehman, and Fimat,

and are controlled by Mr. Baker and Mr. Eveleigh. (Def. Ex. 1-D at 10; Def. Ex 1-A at 3;

Def. Ex. 2-D at 9-10). 

64. One document states that Man is the prime broker for Lake Shore Alternative Investment

and indicates that there are seven other brokers, but does not provide a list of these

brokers. (Plt. Ex. 8 at CFTC Bates 299 02 0002). If any of these brokers was not an NFA

member, Mr. Brodersen would not know about their existence and would not be able to

secure their records. (J. Brodersen, Tr. 276:13-19).

65. According to Mr. Baker and Mr. Rosenberg, the Lake Shore Alternative Financial Asset

Funds are traded through only three FCMs: Fimat, Man, and Lehman. (J. Brodersen, Tr.

190:21-191:7; 261:8-13). 

Risk Management Overlay

66. In 2003, Lake Shore Group instituted a risk management overlay consisting of a

systemwide 5% monthly drawdown limit with no discretion, where the models will

reduce margin to equity traded if losses accumulate. (Plt. Ex. 4 at CFTC Bates 223 04

0021 and 0022; Plt. Ex. 5 at CFTC Bates 223 07 0239 and 0240; Plt. Ex. 9 at CFTC

Bates 299 02 0021). This completely automated system was put into place after a 48.56%

monthly drawdown in July of 2002. (Plt. Ex. 5 at CFTC Bates 223 07 0241). 

67. Lake Shore Group has disclosed that investing in futures derivatives involves significant

risk factors and can quickly lead to large losses as well as gains. (Plt. Ex. 6 at CFTC

Bates 100 06 0021-22). Nevertheless, it has also represented that since implementation

of the risk overlay, its worst daily drawdown has been 5%, and its monthly drawdown is

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 17 of 86
 This is the calculation method used by Mr. Brodersen when he computed the 1

performance of the trading accounts for Lake Shore Alternative Financial Asset Fund IV. (Plt.

Ex. 18 at p.13).

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targeted at no more than 5%. (Plt. Ex. 8 at CFTC Bates 299 02 0006). In addition, Lake

Shore Limited’s due diligence represents that it will have a maximum monthly drawdown

of 5%, and that this strategy has been successful for more than 39 months. (Plt. Ex. 9

CFTC Bates 299 02 0023). This overlay is consistent with the monthly returns listed in

the fact sheets for Lake Shore Alternative Financial Funds I, II, III, and IV. (Plt. Ex. 19).

68. Lake Shore Alternative Financial Asset Fund II showed monthly trading losses of greater

than 5%/month for four of nine months between October 2006 and June of 2007. (Plt.

Ex. 18 at 11-12, reflecting losses of -5.45% for 10/06, -17.03% for 11/06, -9.71% for

3/07, and -20.20% for 5/07, calculated using Mr. Brodersen’s formula of dividing the net

performance by beginning net asset value for the relevant period). Similarly, Lake Shore 1

Alternative Financial Asset Fund I shows trading losses for March through May of 2007

that are substantially higher than 5%. (Id., reflecting losses of -39.08% for 3/07, -21.19%

for 4/07, and -70.87% for 5/07). 

E. Lake Shore Limited and Lake Shore Inc.’s Status as CFTC Registrants and

NFA Members

69. On June 21, 2007, Lake Shore Limited was served with a request by the Commission

pursuant to Section 4n of the Act. The request sought immediate production of Lake

Shore Limited’s books and records, including but not limited to, a list with the name and

complete address of each client, subscriber, or participant, and samples or copies of all

reports, letters, circulars, memoranda, publications, writings, or other literature or advice

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 18 of 86
 The court notes that page 2 of Def.’s Ex. 1-D contains a different reference number, 2

0392711. This appears to be a typographical error.

-19-

distributed to clients, including documentation disclosing all futures accounts. (Plt. Ex.

1,2; M. Spear, Tr. 20:21-23:8). 

70. Lake Shore Limited has been registered with the CFTC as a CPO and as a CTA since

January 17, 2007 and has been an NFA member since that time. (Plt. Ex. 15, J.

Brodersen Aff. at ¶ 2; Stipulation, Tr. 369). 

71. Prior to January 2007, Lake Shore held itself out as a CFTC registrant under the

registration of Lake Shore Inc. Lake Shore Inc. was registered with the CFTC and an

NFA member until February 2007, when it withdrew its registration. Lake Shore Inc.

retained its registration status at the request of Mr. Baker until Lake Shore Limited was

registered with the NFA. (Plt. Ex. 12, T. Church Decl. at ¶¶ 1,8).

72. Lake Shore Alternative Investment also held itself out as being subject to U.S. regulation. 

(Plt. Ex. 8 at 299 02 002).

73. Lake Shore Limited’s promotional materials state that it is doing business as a CFTC

registrant and that it is a NFA member. (Plt. Ex. 19 at 1). In addition, the account

opening documents at Man for Lake Shore Alternative Financial Asset Fund IV, Ltd.

dated March 26, 2007, state that “the company is authorised by” the NFA and provides an

NFA reference number 0372911 , which is Lake Shore Limited’s NFA identification 2

number. (Def. Ex. 1-D at 1-2). In the Pitch, the Lake Shore Group refers to Lake Shore

Limited’s NFA identification number. (Plt. Ex. 4 at 5). Thus, Lake Shore Limited

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 19 of 86
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opened Lake Shore Alternative Financial Asset Fund IV acting in its capacity as a CFTC

registrant.

74. Exhibit 19 consists of eight Fact Sheets dated May 31, 2007 for eight Lake Shore

Alternative Financial Asset Funds and one Fact sheet dated December 31, 2006 for Lake

Shore Alternative Financial Asset Fund IV Limited. The Fact Sheets for Lake Shore

Alternative Financial Asset Funds I, II, III, and IV (Dec. 2006), Yen Fund Ltd, Yen Fund

Limited II and Yen Fund Limited III state that the respective funds are managed by Lake

Shore Limited, a registered CPO and CTA. (Plt. Ex. 19; M. Spear, Tr. 43). According to

the fact sheets, Lake Shore Limited acted as a CPO and a CTA in connection with each of

these funds. (Plt. Ex. 19).

75. In the due diligence documents for Lake Shore Limited, it is described as “registered with

the CFTC in 1996 and with the National Futures Association (NFA),” (Plt. Ex. 5 at CFTC

Bates 223 07 0234), as well as “a registered commodity trading advisor...,” (Plt. Ex. 5 at

CFTC Bates 223 07 0235 and 0238).

76. Lake Shore Limited’s Alternative Investment Due Diligence Questionnaire advises future

clients that “[r]elying on statements from Lake Shore and its regulatory history provides

the comfort available,” as opposed to receiving redacted information about performance

from past or existing clients. (Plt. Ex. 8 at CFTC Bates 299 02 0004).

77. The Pitch contains numerous representations that Lake Shore Inc. – now reorganized into

Lake Shore Limited – is a CFTC registrant and NFA member. Specifically, it represents

that: (a) Lake Shore Limited, as the reorganized version of Lake Shore Inc., “in 2000

applied to regulators to begin operations in other parts of the world” (Plt. Ex. 4 at 4); (b)

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 20 of 86
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“Lake Shore is a registered money manager which specialises in Exchange Traded

Financial Derivatives” (Plt. Ex. 4 at 4); (c) “Lake Shore is a CTA . . . , CPO . . . , Member

of the NFA . . . and Registered with the CFTC. . . .” (Plt. Ex. 4 at 5, 10, 18, 37); (d) “All

Futures Professionals register with the NFA” (Plt. Ex. 4 at 6); and (e) “NFA provides

Audits, Investigations, Review of Promotional Materials and Disclosure Documents,

Trade Practice and Market Surveillance, Arbitration and Recourse” (Plt. Ex. 4 at 6). The

document’s references to Lake Shore Limited and “Lake Shore” refer to the same entity:

Lake Shore Limited. (Plt. Ex. 4).

78. Lake Shore’s website represented that it was founded as Lake Shore Inc. in 1993 and

reorganized in 2006 as Lake Shore Asset Management, Ltd. of Bermuda. (Plt. Ex. 15, J.

Brodersen Aff. at ¶ 7). The website represented that Lake Shore was regulated by the

CFTC and the NFA. (Id.) 

79. Sebastian Sainsbury, one of the Lake Shore salesmen, told Mr. Brodersen that one of the

key points in Lake Shore’s sales presentations was that they were registered in the U.S.

with the CFTC and were also NFA members. (J. Brodersen, Tr. 211:14-17). This is

supported by the fact that the Pitch stresses that Lake Shore is a CFTC registrant and

NFA member.

F. Lake Shore Limited and Lake Shore Inc.’s Status as Active CTAs and/or

CPOs

80. According to the Confidential Explanatory Memorandum for Lake Shore Fund IV

(“Confidential Memorandum”), Fund IV “seeks to maximize returns whilst preserving

capital by investing in three assets, Lake Shore Alternative Financial Asset Fund Ltd.

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 21 of 86
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(LSAFA I), Lake Shore Financial Asset Fund II Ltd. (LSAFA II), and Lake Shore

Alternative Financial Asset Fund III Ltd. (LSAFA III).” (Plt. Ex. 6 at CFTC Bates 100 86

0021, 0023; M. Spear, Tr. 35:18-21 and 42:7-10). The Fund IV Fact Sheet says the same

thing. (Plt. Ex. 6 at CFTC Bates 100 86 0045).

81. The Confidential Memorandum also states that Fund IV “utilized the proprietary trading

program developed and operated by Lake Shore Asset Management Limited....” (Plt. Ex.

6 at CFTC Bates 100 86 0021).

82. The Confidential Memorandum further states that “[t]he investment Manager of the Fund

is Lake Shore Limited and the Investment Advisor is Lake Shore Limited, a corporation

incorporated in Hamilton, Bermuda and a registered CTA...” (Plt. Ex. 6 at CFTC Bates

100 86 0021, 0023, 0024). 

83. Mr. Brodersen believed that Lake Shore’s press release of January 2007 on Lake Shore

Group of Companies letterhead announcing that Lake Shore Limited is launching Lake

Shore Alternative Financial Asset Fund IV meant that Lake Shore Limited was the pool

operator for that fund. (J. Brodersen, Tr. 240:1-19).

84. Lake Shore Inc. acted as the CTA for the Lake Shore Alternative Financial Asset Funds

before Lake Shore Limited was formed, as shown by the Pitch, which states that Lake

Shore Inc. was the registered money manager for these funds, used trading systems

“refined and formalized over the years,” (Plt. Ex. 4 at 4, 11-16), and a new risk

management program instituted in 2003 (Id. at 19-20), which caused it to have a trading

system that compared favorably with other CTAs (Id. at 22). 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 22 of 86
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85. In addition, Lake Shore Limited’s due diligence states that Lake Shore Asset

Management “began trading Exchange Traded Derivatives on behalf of clients on January

1, 1994” and uses a proprietary trading methodology. (Plt. Ex. 5 at CFTC Bates 223 07

0235, 0238-0240; Plt. Ex. 9 at CFTC Bates 299 01 0020).

86. Lake Shore Inc.’s due diligence questionnaire relates history for Lake Shore Inc. going

back five 5 years to 2002, and states that Lake Shore Inc. managed accounts and executed

trades and was a registered CTA and CPO. (Plt. Ex. 8 at CFTC Bates 299 02 0012-0013,

299 02 0004 and 299 02 0006-0007).

87. Lake Shore Inc.’s senior trading staff manages trading for Lake Shore Alternative

Investment “on an ongoing basis” and “[a]ll accounts are traded under the Lake Shore

Asset Management Inc. proprietary system.” (Plt. Ex. 8 at CFTC Bates 299 62 0005,

0008).

88. According to Thomas Church, who was a principal for Lake Shore Inc., he formed Lake

Shore Inc. in 1996 to facilitate the sale of a trading system. In 2000 or 2001, Mr. Baker

told Mr. Church that he wanted to use Lake Shore Inc. to solicit firms and securities

brokers to interest them in getting clients to invest a portion of their portfolios in

commodity futures. Mr. Church was concerned that Mr. Baker’s concept was not set up

in compliance with U.S. law. (Plt. Ex. 12, T. Church Decl. at ¶¶ 1, 4, 6, 7).

89. Until the NFA recently showed him Lake Shore documents, Mr. Church was unaware

that the Lake Shore Group was using Lake Shore Inc.’s name in its promotional or

disclosure materials. Mr. Church also denied that Lake Shore Inc. was involved in

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 23 of 86
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creating or designing a trading system to be used by the Lake Shore Group. Mr. Church

sold the right to use the name Lake Shore Inc. to Mr. Baker in 2006. (Id.).

G. Futures Trading in the United States by Lake Shore Limited

90. Lake Shore represents in the Pitch that it “only trades regulated exchange traded

derivatives.” (Plt. Ex. 4 at 18; J. Brodersen, Tr. 215:6-7).

91. The account statements from Fimat, Lehman and Man show that the Lake Shore

Alternative Financial Asset Funds were trading commodity futures contracts on U.S.

exchanges. (J. Brodersen, Tr. 263:23-264:3). A substantial amount of losses at Man,

Fimat and Lehman occurred as the result of futures trading on U.S. futures exchanges. 

(Plt. Ex. 15, J. Brodersen Aff. at ¶ 40).

92. Lake Shore told its pool participants that the pools would trade commodity futures

contracts on U.S. exchanges. (Plt. Ex. 7; M. Spear, Tr. 44:17-25; Plt. Ex. 19).

93. Each of the fact sheets for the Lake Shore Alternative Financial Asset states that they will

trade commodity futures contracts that are traded on U.S. Exchanges. For instance: IMM

currencies are traded at the Chicago Mercantile Exchange, U.S. Treasuries are traded at

the Chicago Board of Trade and WII crude oil is traded at the New York Mercantile

Exchange. (Plt. Ex. 7; J. Brodersen, Tr. 264:2-3; M. Spear, Tr. 44:10-25). 

G. Interest on Sentinel Accounts – Payroll, Expenses, and Real Estate in Greece

94. Lake Shore uses Anglo International Associates Limited (“Anglo”) for its payroll. (Plt.

Ex. 23, E. Bloom, Tr. 294:7-9; M. Spear, Tr. 310:25-311:2). Mr. Rosenberg indicated

that his compensation came from Anglo. (M. Spear, Tr. 311:11-13). Sentinel records

show that between 2006 and 2007, approximately $976,207 was wired out from Lake

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 24 of 86
 Specifically, Mr. Brodersen testified “[i]f the pool operator is going to earn all the 3

interest on the accounts that are held at Sentinel, there’s an incentive for that pool operator to

keep the maximum amount of funds at Sentinel so that they can earn that interest. It kind of runs

contrary to the whole, I guess, concept of a commodity fund where your first goal or the pool

operator’s or manager’s goal should be to trade in the markets and make money for the clients.” 

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Shore Accounts at Sentinel to Anglo. (Plt. Ex. 28). In June of 2007, Mr. Eveleigh sent

Sentinel an email requesting that $445,683 be wired to Anglo accounts. (Plt. Ex. 23; E.

Bloom, Tr. 294:7-24). 

95. The Confidential Memorandum states that “[t]he promoters of the Fund will bear all

expenses incurred in connection with its organization and its ongoing operation.” (Plt.

Ex. 6 at CFTC Bates 100 86 0021). It also states that Lake Shore Limited will pay its

employee’s salaries. (Plt. Ex. 6 at CFTC Bates 100 86 0025).

96. The offering memorandum for Fund IV disclosed that interest would not be paid to the

investors on funds held with the custodian. (Plaintiff. Ex. 6 at CFTC Bates 100 86 0025;

J. Brodersen, Tr. 330:17-19). However, Lake Shore Limited did not disclose that pool

funds were used to pay its employees’ salaries or payroll. (J. Brodersen, Tr. 220:18-23). 

It also did not disclose that pool funds were being used to pay overhead or the expenses

of the pool operator. (Id. at 220:13-16). 

97. Mr. Brodersen testified that failure to disclose that a pool is paying interest earned on

customer funds to a third party should be disclosed due to a conflict of interest. The

conflict of interest in this case arose from the fact that the pool operator earns interest on

accounts with Sentinel. If it is receiving the interest, it provides an incentive for the

operator to maximize the funds at Sentinel to maximize the amount of interest. (Id. at

219:19-220:17).3

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 25 of 86
He then concluded that the “conflict should be disclosed, and just the mere fact that that [sic]

interest is going to a third party should be disclosed.” Similarly, he stated that if pool funds were

being used to pay the pool operator’s overhead, salary, and expenses, that would also have to be

disclosed.

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98. Mr. Brodersen also testified that if he learned during an audit that a pool operator was

using a substantial amount of customer funds to pay for undisclosed expenses, the NFA

would take emergency action against that pool operator. (Id. at 220:24-221:14). 

99. Lake Shore Limited’s citation to documents stating that investors were told they would

not receive interest from the Sentinel accounts is thus irrelevant because Lake Shore

Limited was obligated to disclose a disposition of the interest that created a conflict of

interest with the investors, such as the payment of payroll and expenses.

100. As noted above, Lake Shore has 35 accounts at Sentinel. Each account consists of three

separate accounts called operating, trading and income. Each account earns interest that

accrues daily. At the end of each month, Lake Shore directed Sentinel to move the

income from every Lake Shore Fund trading and operating account into the

corresponding income account. (E. Bloom, Tr. 285:18-286:1-6 and 354). 

101. Usually, a few days into each new month, Lake Shore would direct Sentinel to wire the

money out of the income accounts to a company called Hanford Investments (“Hanford”). 

(E. Bloom, Tr. 286:16-23 and 355:11-15; J. Brodersen, Tr. 218:10-17). Hanford

Investments is an introducing broker operated by Baker. (J. Brodersen, Tr. 218:13; M.

Spear, Tr. 308:3-7). 

102. Sentinel records show that between November 2002 and June 2007, $9,936,505.74 was

wired out from Lake Shore accounts at Sentinel to Hanford for the benefit of Philip

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 26 of 86
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Baker. (Plt. Ex. 24; E. Bloom, Tr. 298:4-8; see also M. Spear, Tr. 308:2-310:16). That

amount represents interest earned on the funds at Sentinel. (J. Brodersen, Tr. 218:13-15).

103. Lake Shore offering memoranda and disclosure documents do not disclose that the

interest would be paid to Hanford. (J. Brodersen, Tr. 219:9-18). Payment of interest to

an entity affiliated with the Lake Shore’s principal is proper if it is authorized and

disclosed, as it is not unusual for an investment fund to direct payment to third parties. 

(E. Bloom, Tr. at 355:18-25). However, failure to disclose that interest is being retained

for a purpose that creates a conflict of interest with investors is “a problem.” (J.

Brodersen, Tr. 264:13-20). 

104. Plt. Exhibit 6 contains the following language: "LSAFA I, LSAFA II, and LSAFA III

will not pay the Fund any interest on cash balances held by the Custodian." (Plt. Ex. 6 at

CFTC Bates 100 06 0025). The document defines the Bank of New York as the

custodian and defines “the Fund” as Lake Shore Alternative Financial Asset Fund IV

Limited. (Plt. Ex. 6 at CFTC Bates 100 06 0021-22). According to Mr. Brodersen, this

disclosure states that Funds I, II and III will not pay Fund IV interest on funds held by

Bank of New York, but cannot be fairly understood to authorize or disclose that the

income earned on the funds on deposit at Sentinel will be paid to an undisclosed entity

controlled by Mr. Baker. (J. Brodersen, Tr. 264:13-20).

105. As noted above, interest from the Sentinel accounts was transferred to Hanford. Hanford,

via a Bank of New York wire dated June 4, 2007, sent $719,993.50 to Lefkada, Athens,

Greece, for the purchase of real estate. (Plt. Ex. 27 at 2; M. Spear, Tr. 310:6-7). No

evidence shows that investors were ever told that interest on fund accounts would be

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 27 of 86
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given to a company run by a Lake Shore Limited principal to be used for the purchase of

real estate.

106. Lake Shore Inc. has represented that “Lake Shore operates on a full disclosure basis.” 

(Plt. Ex. 8 at CFTC Bates 299 02 0011).

H. Commissions on Accounts with Man

107. On March 16, 2004, Man wrote letters to Lakeshore Alternative Financial Asset Ltd. and

Hanford regarding Account No. 0120. The letters stated that during a routine review,

Man noticed that profitability on the account had dropped by over $1.1M and that the

account was very actively traded. (Plt. Ex. 21 & 22). Mr. Brodersen testified that these

letters showed that Man was concerned about the losses in the accounts and the

commissions that were being charged to the accounts. (J. Brodersen, Tr. 272:2-14). The

letters predate the formation of Lake Shore Limited.

108. Mr. Brodersen’s review of the letters showed that Account No. 0120 generated $700,000

in commissions, which was a “very high commission-to-equity ratio.” He stated that

churning occurs when an account is overtraded to generate commissions, and generally

exists when commissions exceed an 18% commission-to-equity ratio. (J. Brodersen, Tr.

269:23-271:17).

109. In 2004, Hanford received a significant portion of the commissions charged to Fund I by

Man. This rebate arrangement was not disclosed in any of the contemporaneous Lake

Shore materials. (J. Brodersen, Tr. 271:18-272:1; Plt. Ex. 21).

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 28 of 86
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I. CFTC’s Request to Inspect Lake Shore’s Books and Records

110. The CFTC and the NFA independently sought to inspect Lake Shore Limited’s records to

verify the trading results reported on Lake Shore’s website. The regulators were also

interested in reviewing trading records prepared by third parties, i.e., the FCMs, because

of the reliability of obtaining information from an outside source. (J. Brodersen, Tr.

168:9-13 and 169:7-9 and 182:15-21).

111. Lake Shore Limited has refused to permit inspection of its books and records by the NFA

and the CFTC. In early July and through Alexander Schwab (a Swiss attorney), Lake

Shore Limited told NFA and CFTC representatives that international law prevented Lake

Shore from producing the trading and customer records requested by NFA and the CFTC. 

In regard to records that did not disclose customer identity, Mr. Schwab told Mr.

Brodersen that he would have to inspect each record prior to production to ensure that

production would not violate any international laws. Mr. Schwab indicated that this

process would take him 3-5 weeks. (J. Brodersen, Tr. 183:20-25 and 184:1-11). As of

this date, approximately eight weeks later, Mr. Schwab has not produced any records. 

112. On July 2, 2007, Mr. Baker participated in a conference call relating to the CFTC and the

NFA’s efforts to audit Lake Shore Limited. During this call, Mr. Baker told CFTC and

NFA staff that he did not know where Lake Shore Limited’s records were located. When

asked why the address for Lake Shore Limited in Toronto, Ontario, Canada provided on

various account documents was a UPS store, Baker indicated that Lake Shore Limited

had used the address temporarily while it attempted to develop an office. Mr. Baker was

asked to provide the address or location of the records. Mr. Baker represented that he

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 29 of 86
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would locate this information later that afternoon and inform the CFTC and the NFA. 

However, at no time has Mr. Baker provided any information about the address or

location of the records. (M. Spear, Tr. 62:16-63:18). 

113. At no time has Lake Shore Limited or any representative provided any customer records,

with the exception of certain records relating to Mr. Stoltz, in response to the CFTC’s

request under § 4n of the Act. (M. Spear, Tr. 64:2-5). 

114. Lake Shore Limited did not explain its account naming conventions to the NFA during its

analysis of the trading account records and track records produced by the FCMs. (J.

Brodersen, Tr. 224:23-225:2). The analysis was complicated by the fact that the names of

the accounts listed on the website did not always match the names of the accounts at the

FCMs and some of the accounts did not appear to have corresponding trading accounts

with matching names. (J. Brodersen, Tr. 225:2-20). In his 21 years of auditing

commodity pools, Mr. Brodersen had never encountered naming conventions like those

used by Lake Shore Limited. (J. Brodersen, Tr. 226:7-9).

115. The CFTC and the NFA have requested that Lake Shore provide information to support

its performance results. Lake Shore has refused to do so. (Plt. Ex. 15, J. Brodersen Aff.

at ¶ 24). Lake Shore Limited has provided no trading records that would permit the

auditors to verify the information about Fund IV–U.S. that Lake Shore Limited gave to

the Commission and the NFA. (J. Brodersen, Tr. 248:7-11). Lake Shore Limited has

also not produced records in its possession that do not disclose the identity of its

customers. (J. Brodersen, Tr. 184:2-8).

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 30 of 86
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The Amount Lake Shore Limited/Lake Shore Has Under Management

116. In the Due Diligence, Lake Shore represented that it has approximately $900 million in

SMAs. (Plt. Ex. 5 at 11).

117. Mr. Rosenberg told the NFA auditors that Lake Shore has approximately $1 billion under

management. (Plt. Ex. 15, J. Brodersen Aff. at ¶ 10).

118. A Lake Shore document entitled “Assets Under Management” as of the end of June 11,

2007, attached to Mr. Brodersen’s affidavit, shows total assets under management equal

to $1.05 billion with just over $290 million in the Lake Shore Alternative Financial Asset

Funds and $760 million in SMAs. (Plt. Ex. 15, J. Brodersen Aff. at ¶ 21).

119. In the July 2, 2007, telephone conversation with NFA and CFTC staff, Mr. Baker claimed

that the firm had $1 billion under management with approximately $230 million invested

in the funds and the remaining $770 million in SMAs. (Plt. Ex. 15, J. Brodersen Aff. at ¶

20). Lake Shore has not identified any SMAs to the CFTC or the NFA. (Plt. Ex. 15, J.

Brodersen Aff. at ¶ 23). To date, the CFTC and NFA have only been able to identify one

managed account invested outside of the Lake Shore Alternative Financial Asset Funds. 

(Plt. Ex. 15, J. Brodersen Aff. at ¶ 22). Specifically, Sentinel has an account named Lake

Shore Alternative Asset Account II, which is part of the SMA that in turn is part of Lake

Shore Fund II. (See the court’s chart at Exhibit 1; Plt. Ex. 13 & 18).

120. Lake Shore Limited does not have $1 billion under management with the four FCMs. 

The FCM records indicate that the FCMs are holding approximately $230M. 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 31 of 86
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K. Analysis of Lake Shore Alternative Financial Asset Funds I, II, III, and IV

121. As noted above, Mr. Baker and Mr. Rosenberg stated that the Lake Shore Alternative

Financial Asset Funds are traded through only three FCMs: Fimat, Man, and Lehman. (J.

Brodersen, Tr. 190:21-191:7 and 261:8-13). The CFTC and the NFA obtained Lake

Shore trading records from each of these FCMs. Mr. Brodersen testified that he had no

reason to believe that he was missing trading records for any other accounts because Mr.

Baker and Mr. Rosenberg stated that Fimat, Man, and Lehman were the prime brokers. 

Mr. Brodersen did, however, acknowledge that he did not have Lake Shore promotional

materials for every year going back to 2002. (J. Brodersen, Tr. 232:1-7).

122. Neither the NFA nor the CFTC have received any account statements in the name of

Futures Trading Group (“FTG”). (M. Spear, Tr. 85:20 – 86:1; J. Brodersen, Tr. 232:21-

23). According to Mr. Baker, FTG is a non-U.S. company that was the predecessor to

Lake Shore (it is unclear which “Lake Shore” entity this is). (J. Brodersen, Tr. 185:21-

186:17). 

123. Mr. Baker told Mr. Brodersen that he was doing business in Europe under the name FTG. 

Mr. Brodersen did not have records for any accounts held by FTG. He acknowledged that

if other accounts were included in Lake Shore’s track record that he did not know about,

it could change the track record. (Id. at 232:19-25). 

124. Mr. Brodersen testified that he had no information indicating that the Lake Shore Group

did business under a different name from 1994 to the present. Mr. Brodersen did not

know if the Lake Shore Group ever traded under the name FTG. (J. Brodersen, Tr. 262:2-

7).

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 32 of 86
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125. Mr. Brodersen also testified that principals were required to disclose trading that had

occurred in their other accounts as part of their track record. (Id. at 233:3-13). Contrary

to Lake Shore Limited’s suggestion, however, he did not state that principals were

permitted to comingle results from different accounts held by unrelated funds without any

sort of disclosure or explanation. (Id.).

126. If any of the Lake Shore Funds invested in an account in the name of FTG, if it was

allowed, it would have to have been disclosed. (J. Brodersen, Tr. 274:9-16).

127. Although Lake Shore Limited’s system for naming accounts was confusing, Mr.

Brodersen testified that this did not impact his ability to identify accounts or track the

performance of those accounts. (J. Brodersen, Tr. 236:8-16).

128. It is possible for a fund to invest in its own trading account and another fund’s trading

account. In this instance, the first fund’s performance would be a blend of both funds’

performances, but this constitutes illegal commingling. (J. Brodersen, Tr. 236:16-21). 

However, a fund can invest in another fund (i.e., a fund of fund investment). If this

occurred with the Lake Shore Alternative Financial Asset Funds, to know a particular

fund’s performance, an auditor would have to look at both funds’ performance and their

trading accounts. (J. Brodersen, Tr. at 236:22-238:14). Mr. Brodersen reviewed the

trading performance of all the funds. (Plt. Ex. 18).

129. Mr. Brodersen reviewed documents from the trading accounts at the three trading FCMs. 

From this review, he ascertained that the Lake Shore Alternative Financial Asset Funds

had lost money overall. Regardless of whether he knew about all possible fund of fund

transfers, he testified that Lake Shore represented that all of the Lake Shore Alternative

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 33 of 86
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Financial Asset Funds were profitable. He then concluded that even without information

about possible fund to fund transfers, overall profitability was the critical inquiry because

overall, the accounts lost money. In other words, since all of the Lake Shore Alternative

Financial Asset Funds were shown as profitable, he found that there was no place for

losing trades to go to explain the overall profitability regardless of any fund to fund

transfers. (Id.).

130. Mr. Brodersen was unable to square the fact that all seven Lake Shore Alternative

Financial Asset Funds were said to be profitable with the fact that the trading accounts at

the three trading FCMs for the Lake Shore Alternative Financial Asset Funds lost $29

million. (J. Brodersen, Tr. at 264:4-12).

131. As of June 11, 2007, Lake Shore records showed that the U.S. investor in Lake Shore

Alternative Financial Asset Fund IV (via Fund IV U.S.) had a balance of $1,015,324.29. 

That investor deposited $1M in May of 2007, so the June figure would show the profit

made in May through June 11, 2007. In May of 2007, Lake Shore Alternative Financial

Asset Fund IV had a negative performance. (J. Brodersen, Tr. 268:1-25). Because

Fimat’s records were dated May 31, 2007, Mr. Brodersen was unable to analyze Lake

Shore Alternative Financial Asset Fund IV’s June 2007 profitability.

132. Funds overall are not interchangeable with the trading accounts. Thus, an investment

manager would not focus on money coming in and out of a fund. Instead, he would be

concerned with the money in the trading account, and would know the amount of funds in

the trading account and how much he/she can access for trading. (J. Brodersen, Tr.

242:1-5, 10-13).

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133. With respect to the monies at Sentinel, Mr. Brodersen testified that there were a number

of transactions between funds which appeared to be irregular since an FCM cannot

commingle the funds of one commodity pool with another. (J. Brodersen, Tr. 244:9-10). 

He conceded that it would be possible for the transfers to be proper because they could be

fund to fund transfers, represent a feeder fund, or flow from an investor’s decision to

change strategy, but stated that this type of activity warranted further investigation. (J.

Brodersen, Tr. 245:1-14, 247:2-11).

134. The fact sheet for Lake Shore Alternative Financial Asset Fund IV states that the

manager’s investment objective “is to maximize returns while preserving capital” by

investing equally in Lake Shore Fund I, II, and III. (Plt. Ex. 19 at 221 04 0157). In other

words, money from Lake Shore Alternative Financial Asset Fund IV flows towards Lake

Shore Alternative Financial Asset Funds I, II, and III.

135. When a CPO opens up an account with a trading firm, it opens that account in the name

of the fund, not its own name, because the fund has to be a separate legal entity. (J.

Brodersen, Tr. 249:25-250:2).

136. In response to questions from Lake Shore Limited’s counsel, Mr. Brodersen conceded

that his analysis of Lake Shore Limited’s accounts might change if Lake Shore Limited

provided all of its records. (J. Brodersen, Tr. 245:15-246:2).

137. The fact that somebody loses money trading does not in and of itself show that anything

is wrong. (J. Brodersen, Tr. 251:11-16).

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138. Mr. Brodersen analyzed over five years of Man’s trading accounts. (J. Brodersen, Tr.

251:25-252:2). During this time, Man sent two letters due to its concern about churning. 

(Id. at 252:7-16).

139. Mr. Brodersen testified that he had not seen support for Lake Shore Limited’s simulated

trading figures. He also stated that under NFA regulations, it is impermissible to use

simulated results if they do not comport with the actual results, and if actual results for

three months existed, it was impermissible to use simulated results at all. However, he

also acknowledged that NFA regulations only apply to NFA members or funds doing

business in the U.S. (J. Brodersen, Tr. at 253:9-21 and 254:1-6).

140. Lake Shore Limited’s “Assets Under Management” as of June 11, 2007 consist of:

Total

1.05B

___________________________|_________________________________

| | | |

LS I LS II LS III LS IV

492.0M 369.0M 116.5M 73.0M

| | | | | |

SMA LSAFA Fund I SMA LSAFA Fund II LSAFA Fund III LSAFA Fund IV

419.0M 73.0M 338.0M 31.0M 116.5M 73.0M

(See the chart attached to Plt. Ex. 15). The reader may also wish to refer to Ex. 1 to this

order for a more complete depiction of the Lake Shore funds’ structure.

141. Lake Shore Funds I and II contain SMAs as well as Lake Shore Alternative Financial

Asset Fund I and II, respectively. Lake Shore Funds III and IV consist of Lake Shore

Alternative Financial Asset Fund III and IV, respectively. The FCMs with the accounts

for Lake Shore Alternative Financial Asset Funds I, II, III, and IV have given their records

to the CFTC and the NFA. Based on Lake Shore Limited’s own chart depicting the

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distribution of monies, therefore, the FCMs’ records for Lake Shore Alternative Financial

Asset Funds I, II, III, and IV should reflect the monies in those accounts, and the trading

FCM records from Fimat, Man, and Lehman should reflect the trades for Lake Shore

Alternative Financial Asset Funds I, II, III, and IV. Thus, Lake Shore Limited’s

contention that the CFTC cannot conduct an accurate audit of Lake Shore Alternative

Financial Asset Funds I, II, III, and IV due to lack of complete records incorrect because

there are no SMAs associated with the accounts for those funds.

142. It is undisputed that neither the CFTC nor the NFA have complete records for the Lake

Shore Funds because Lake Shore Limited refused to turn over its records. For the Lake

Shore Alternative Financial Asset Funds, the CFTC and the NFA have records from the

FCMs but no records from Lake Shore Limited.

143. In response to questions from Lake Shore Limited’s counsel, Ms. Spear stated that it is

possible that the Lake Shore Group or Lake Shore Limited have accounts with custodians

other than Man, Lehman, Sentinel, and Fimat. (M. Spear, Tr. 83:20 – 84:14). However,

both Mr. Baker and Mr. Rosenberg stated that the Lake Shore Alternative Financial Asset

Funds are traded through only three FCMs: Fimat, Man, and Lehman. (J. Brodersen, Tr.

190:21-191:7 and 261:8-13).

144. Mr. Baker has also stated in a declaration that the NFA and CFTC do not have all of the

prime brokerage statements needed to verify the performance and assets of the Lake

Shore Funds. (Second Declaration of P. Baker, Def. Ex. 11, at ¶ 2). This is true to the

extent that the CFTC and the NFA do not have complete records for Lake Shore Funds I,

II, III, and IV. In contrast, the CFTC and the NFA have records from the 4 FCMs

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identified by Mr. Baker and Mr. Rosenberg for the Lake Shore Alternative Financial

Asset Funds. The FCM records can be used to assess the performance of the Lake Shore

Alternative Financial Asset Funds, which are the relevant funds. In this regard, reference

to the court’s chart, which depicts this graphically, may be helpful. (See Exhibit 1).

145. The Lake Shore Alternate Financial Asset Fund II fact sheet states that this fund started

trading in January 2005 and provides what purports to be actual trading results. (Plt. Ex.

19 at 221 04 0117). The NFA was only able to locate trading statements for this account

beginning in October 2006 based on the FCM records, which presumably reflect all of the

activity that occurred with the accounts associated with this fund. (J. Brodersen, Tr.

201:9-20).

146. The NFA and the CFTC do not have all of the records related to the Lake Shore Group of

Companies due to Lake Shore Limited’s position that it is not required to turn over these

records. (J. Brodersen, Tr. 231:2-6).

147. In addition, the CFTC and NFA do not have Lake Shore’s promotional materials for

2002, 2003, 2004 and 2005. (J. Brodersen, Tr. 231:2-6; 232:10-17).

148. A search by NFA for NFA members with accounts for any Lake Shore Group of

Companies funds would not pick up brokerage firms outside of the United States who are

not NFA members. (J. Brodersen, Tr. 276:17-19).

149. The NFA has not received all of the information it normally would receive when

conducting an audit because the entity being audited normally allows access to its

records. (J. Brodersen, Tr. 245:15-24). If the NFA or CFTC were to receive more

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 38 of 86
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information, it is possible that their calculations could change. (J. Brodersen, Tr. 245:25-

246:2).

II. Conclusions of Law

A. Standard for a Preliminary Injunction Under Rule 65 and 7 U.S.C. § 13a-1

“It frequently is observed that a preliminary injunction is an extraordinary and drastic

remedy, one that should not be granted unless the movant, by a clear showing, carries the burden

of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original), quoting

11A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, FEDERAL PRACTICE AND

PROCEDURE § 2948, pp. 129-30 (2d ed. 1995). To obtain a preliminary injunction under Rule 65,

the movant must show (1) it is reasonably likely to succeed on the merits; (2) no adequate

remedy at law exists; (3) it will suffer irreparable harm that outweighs any harm the nonmoving

party will suffer if the injunction is granted; and (4) the injunction will not harm the public

interest. Christian Legal Society v. Walker, 453 F.3d 853, 859 (7th Cir. 2006). 

If the moving party meets this threshold burden, the court exercises its discretion by

weighing the factors against one another in a sliding scale analysis to determine if the balance of

harms weighs in favor of the moving party or whether the nonmoving party or public interest will

be harmed sufficiently that the injunction should be denied. See id.; Cavel International, Inc. v.

Madigan, No. 07-2658, — F.3d —, 2007 WL 2239215, at *2 (7th Cir. Jul. 18, 2007) (discussing

sliding scale analysis).

Thus, a party seeking a preliminary injunction must establish that it will be irreparably

harmed absent the granting of relief. See Re/Max North Central, Inc. v. Cook, 272 F.3d 424, 433

(7th Cir. 2001) (affirming denial of the defendant’s motion for a preliminary injunction where,

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 39 of 86
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among other things, the record failed to show that without an injunction, the defendant would

personally suffer irreparable harm). This requirement seems to present a quandary for a

regulatory body such as the CFTC, which files suit to protect individuals and entities whom it

believes may be harmed by the violation of federal statutes governing futures trading but suffers

no personal harm from the violation of those statutes.

The solution, however, is simple: 7 U.S.C. § 13a-1 authorizes the CFTC to seek

injunctive relief against an entity which “has engaged, is engaging, or is about to engage in any

act or practice constituting a violation of any provisions of the Act or any rule, regulation or

order thereunder.” Irreparable injury to the CFTC is presumed in a statutory enforcement action,

Wisconsin v. Stockbridge-Munsee Community, 67 F.Supp.2d 990, 995-96 (E.D. Wis. 1999),

although the court must also consider whether the record establishes that the financial interests of

the investors (the people who are ultimately harmed if the CFTC’s allegations are well-founded)

are in jeopardy. See Commodity Futures Trading Com’n v. Lake Shore Asset Management Ltd.,

No. 07-2790, — F.3d —, 2007 WL 2206862, at *3 (7th Cir. Aug. 2, 2007).

Thus, the CFTC is entitled to injunctive relief upon a prima facie showing that: (1) a

violation of the Commodity Exchange Act has occurred; and (2) “there is some reasonable

likelihood of future violations.” Commodity Futures Trading Com’n v. Hunt, 591 F.2d 1211,

1220 (7th Cir. 1979). Past misconduct is “highly suggestive of the likelihood of future

violations.” Id. (internal quotations omitted); SEC v. Holschuh, 694 F.2d 130, 144-45 (7th

Cir.1982) (an injunction prohibiting a party from engaging in conduct that violates the provisions

of a statute is appropriate when there is a likelihood that, unless enjoined, the violations will

continue). 

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When determining if future violations are likely, the court should also consider the

“totality of the circumstances” surrounding the defendant’s violations, including the nature of the

violations, whether the violations are isolated or recurrent, the defendant’s recognition of the

wrongfulness of its conduct, and the likelihood that the defendant’s customary business activities

will present opportunities for future violations. Id.; see also Commodity Futures Trading Com’n

v. American Bd. of Trade, Inc., 803 F.2d 1242, 1251 (2d Cir. 1986).

B. The Lake Shore Common Enterprise and Lake Shore Limited’s Status as a

Mere Continuation of that Enterprise

The court will begin by considering whether: (1) Lake Shore Limited is a mere

continuation of Lake Shore Inc.; or (2) the various Lake Shore entities have acted as a common

enterprise. The resolution of these issues is necessary to determine what would normally be the

court’s first concern: the extent of the CFTC’s ability under the Act to challenge actions taken

by Lake Shore Limited.

1. Lake Shore Limited is the Mere Continuation of Lake Shore Inc., and

so The Mere Continuation Exception to Successor Nonliability

Applies

A successor corporation is a corporation that has acquired all the assets of another

corporation which then dissolves. See Brandon v. Anesthesia & Pain Mgt. Assocs., Ltd., 419

F.3d 594, 599 (7th Cir. 2005). Although the successor corporation acquires the predecessor’s

assets, it normally does not inherit the predecessor’s liabilities. Id. However, under the “mere

continuation” exception, a successor corporation that is the mere continuation of the predecessor

corporation does not escape liability for the predecessor’s conduct. Id.

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Under federal common law, there is no rigid test to determine whether one corporation is

the mere continuation of a predecessor; rather courts take a common-sense approach that takes

into account any fact that is relevant in light of the unique situation each case presents. See

North Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 654 (7th Cir. 1998) (“The mere continuation

exception requires close scrutiny of corporate realities, not mechanical application of a multifactor test”). Facts that courts have found to be significant include the following: (1) the

successor has the same or similar management and ownership as the predecessor; (2) only the

successor remains in existence; (3) there is an apparent continuity from the predecessor to the

successor based upon the same personnel and location; (4) the successor has marketed itself and

held itself out to the world as the continuation of the predecessor; and (5) the successor has

operated under a name similar to its predecessor in order to rely on the goodwill associated with

the predecessor’s name. Id.; Kozlowski v. Skyhook Corp., No. JFM-84-3536, 1986 WL 110686,

at **2-3 (D. Md. Jul. 18, 1986); 15 William M. Fletcher, FLETCHER CYCLOPEDIA OF THE LAW OF

CORPORATIONS, § 7124.10; see also Brandon v. Anesthesia & Pain Mgt. Assocs., Ltd., 419 F.3d

at 599 (“there can be continuation without formal successorship. ‘Continuation’ is just a less

colorful name for the ‘changed name,’ ‘different clothes,’ or ‘new hat’ rule.”).

Based upon its close examination of the facts, including the testimony of witnesses and

documentary evidence, the court concludes that Lake Shore Limited is a mere continuation of

Lake Shore Inc. First, Lake Shore Limited and Lake Shore Inc. (and, indeed, all of the Lake

Shore entities) have overlapping management and ownership. Second, Lake Shore Limited

expressly represented that it was a reorganization of Lake Shore Inc. and after the reorganization,

Lake Shore Inc. ceased to exist. Third, Lake Shore Limited and Lake Shore Inc. have the same

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 42 of 86
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Chicago office address and very similar names. Last but not least, Lake Shore Limited took over

the Lake Shore Funds and the Lake Shore Alternative Financial Asset Funds from Lake Shore

Inc. Thus, Lake Shore Limited appears to be carrying on the business of Lake Shore Inc. under a

new name. This is especially true since Lake Shore Inc. was the firm name for Lake Shore

Alternative Investment, which is 100% owned by Senior Management of Lake Shore Asset

Management, the same management who served as principals in Lake Shore Limited.

In sum, the court’s study of the record and its consideration of the witnesses’ testimony

during the preliminary injunction hearing leaves the court with the firm conviction that the CFTC

will ultimately establish that Lake Shore Limited is a mere continuation of Lake Shore Inc. 

There is no evidence to the contrary, other than the fact that Lake Shore Limited and Lake Shore

Inc. were formed as separate entities. Contrary to Lake Shore Limited’s suggestion, this is not

dispositive as to whether Lake Shore Limited is the mere continuation of Lake Shore Limited

because it has long been recognized that the fiction of separate corporate existence does not

shield a corporation from liability for fraud. J.J. McCaskill Co. v. United States, 216 U.S. 504,

514-15 (1910). In light of the factors discussed above, the court thus concludes that Lake Shore

Limited is a mere continuation of Lake Shore Inc. This makes the mere continuation exception

applicable, so Lake Shore Limited is liable for the conduct of Lake Shore Inc.

2. The Lake Shore Entities Were Operated as a Common Enterprise,

and so Lake Shore Limited is Liable for the Conduct of Each

Enterprise

Alternatively, Lake Shore Limited is liable for the conduct of Lake Shore Inc. and all of

the numerous Lake Shore entities under the “common enterprise” theory of liability. Under that

theory, companies that operate as a common enterprise are liable for the deceptive acts and

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 43 of 86
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practices of the other members of the enterprise. See Commodity Futures Trading Com’n v. Wall

Street Underground, Inc., 281 F. Supp. 2d 1260, 1271 (D. Kan. 2003); see also Federal Trade

Com’n v. Bay Area Business Council, No. 02 CV 5762, 2004 WL 769388, at *12 (N.D. Ill. Apr.

9, 2004). In order to determine whether entities have operated as a common enterprise, and thus

whether they are liable for each other’s conduct, courts look to the following factors: (1) whether

the companies are under common control or operate at arms-length; (2) whether they share office

space; (3) whether they transact business through a maze of interrelated companies; and (4)

whether they commingle funds. See Commodity Futures Trading Com’n v. Int’l Berkshire

Group, No. 05-61588, 2006 WL 3716390, at *7 (S.D. Fla. Nov. 3, 2006); Bay Area Business,

2004 WL 769388, at *12.

A common enterprise can consist of a combination of predecessor corporations and their

successors. In that event, the successors and predecessors are all jointly and severally liable for

the conduct of each other. See Commodity Futures Trading Com’n v. Noble Wealth Data Info.

Serv., Inc. 90 F. Supp. 2d 676, 690 (D. Md. 2000) (where two firms were formed as successors to

a predecessor firm, and where they were all operated by the same individuals and used the same

marketing materials, all three firms were jointly and severally liable for each others’ violations of

the Commodity Exchange Act), aff’d in part and vacated in part on other grounds, sub nom.,

Commodity Futures Trading Com’n v. Baragos, 278 F.3d 319 (4th Cir. 2002).

After carefully reviewing the facts in light of the relevant factors set forth above, the court

concludes that the Lake Shore entities operated as a common enterprise:

• Lake Shore Group’s promotional materials refer to “Lake Shore,” the Lake Shore

Group, Lake Shore Inc., and Lake Shore Limited interchangeably. 

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• The Pitch produced to the CFTC by Mr. Eveleigh refers repeatedly and

collectively to “Lake Shore” and includes a variety of Lake Shore entities under

that umbrella.

• Mr. Baker is: (1) the Managing Director, Principal and President of Lake Shore

Limited; (2) the co-founder and managing partner of the Lake Shore Group of

Companies and Lake Shore Institutional & Dealer Relations; (3) the contact

person for Lake Shore Limited listed in its Due Diligence; (4) the Managing

Partner of the Lake Shore Inc.; and (5) the person with primary responsibility for

managing Lake Shore Limited and the Lake Shore Group of Companies’ overall

international business development, operations, sales and marketing.

• Lake Shore Inc. and Lake Shore Limited were both located at 875 N. Michigan

Ave., Suite 1562, Chicago, Illinois. Lake Shore Group letterhead states that it has

offices in Chicago without providing a specific address. Lake Shore Limited and

Lake Shore Group’s management personnel are located in Chicago, and have

administrative/IT/operations staff, and execution staff in Chicago.

• A document on Lake Shore Group’s letterhead entitled “Qualitative Firm

Evaluation & Due Diligence Lake Shore Asset Management Limited” (“Due

Diligence”) states that Lake Shore Limited’s web address is

www.lakeshorefunds.com. 

• Information and performance results for the funds managed and advised by Lake

Shore Limited are available on Lake Shore Group’s website.

• A Lake Shore Limited press release dated January 29, 2007, was on Lake Shore

Group letterhead, referred to www.lakeshorefunds.com, and did not distinguish

between Lake Shore Group and Lake Shore Limited. It also announced Lake

Shore Limited’s launch of Fund IV and touted the 13-year history of “Lake

Shore.” 

• Lake Shore Limited and Lake Shore Inc.’s printed materials relating to the Lake

Shore Alternative Financial Asset Funds are on Lake Shore Group stationery and

contain Lake Shore Group’s logo.

• Lake Shore Limited solicited customers through dealers affiliated with Lake Shore

Group.

• Mr. Rosenberg told NFA staff that the Lake Shore Group is comprised only of

Lake Shore Limited. This is consistent with the organizational chart contained in

the Pitch.

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• The Pitch shows that Lake Shore Limited provides or manages all of the Lake

Shore Group’s products: Lake Shore Alternative Asset Account I, Lake Shore

Alternative Asset Account II, Lake Shore Alternative Financial Asset Funds I, II,

II and IV and Lake Shore Alternative Financial Asset Yen Fund.

In short, this case is the poster child for the transaction of business through a maze of

interrelated companies, and all of the evidence presented to the court indicates that all of the

Lake Shore companies (with the exception of Mr. Church’s Lake Shore Inc., which may not be

the same as the Lake Shore Group’s Lake Shore Inc.) were under common control and did not

operate at arms-length. The reasonable inference is that Lake Shore Alternative Financial Asset

Funds I, II, III, and IV are also all part of the Lake Shore common enterprise and inextricably

related to Lake Shore Limited.

Corporate formalities are not binding when a corporation is part of a common enterprise,

so Lake Shore Limited’s argument in response – that it was incorporated in Bermuda in 2006 – is

unpersuasive. See J.J. McCaskill Co. v. United States, 216 U.S. at 514-15. The court is also not

persuaded by Lake Shore Limited’s claim that Mr. Baker and the other overlapping principals in

the various Lake Shore entities could have been acting properly when handling monies because

they could have been acting in their capacities as principals of separate enterprises. The key

words here are “could have” – the CFTC’s evidence strongly supports an inference that the

entities were all one common enterprise, and Lake Shore Limited has presented no evidence

supporting its spin on this evidence. The court thus finds that the CFTC is likely to prevail on its

claim that the Lake Shore entities operated as a common enterprise and hence each entity is liable

for the conduct of the others. See Wall Street, 281 F. Supp. 2d at 1271; Bay Area Business, 2004

WL 769388, at *12.

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3. Effect of Lake Shore Limited’s Liability for Conduct of Lake Shore

Inc. Both as a Mere Continuation and Under the Common Enterprise

Theory

Because the Lake Shore entities operated as a common enterprise, and because Lake

Shore Limited is the mere continuation of Lake Shore Inc., there is no meaningful distinction

between any of these entities. See Commodity Futures Trading Com’n v. Equity Fin. Group,

LLC, No. 04 CV 1512, 2007 WL 2198805, at *2 (D. N.J. June 28, 2007) (“In substance, there is

no meaningful distinction among the entities, which operated as a common enterprise.”). As a

result, Lake Shore Limited is as equally liable for the conduct of Lake Shore Inc. and the other

Lake Shore entities as it is liable for its own conduct. 

Nevertheless, defendant Lake Shore Asset Management Limited contends that: (1) it is

under no obligation to produce the records of the other Lake Shore entities because the other

entities are not parties to this suit; and (2) the court has no injunctive powers over the other Lake

Shore entities because they are not parties to this suit. These contentions are unfounded. As the

court has already concluded based upon the facts as set forth above, the Lake Shore entities are

indistinguishable: they operated as a common enterprise, and in addition Lake Shore Asset

Management Limited is the mere continuation of Lake Shore Asset Management, Inc. 

Accordingly, the court has the power not only to enjoin named defendant Lake Shore Asset

Management Limited, but also the other Lake Shore entities that formed the common enterprise. 

See Commodity Futures Trading Com’n v. Wall Street Underground, Inc., No. 04-3131, 2005

WL 958476, at *2 (10th Cir. Apr. 27, 2005) (affirming preliminary injunction against an entity

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 47 of 86
 The court does not mean to suggest by its citation to the Wall Street Underground case 4

that it believes that Lake Shore Inc. did not act as a CTA. Instead, the citation goes to the court’s

power to enjoin the entities comprising a common enterprise.

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that was not a CTA subject to CFTC oversight, but which participated in a common enterprise

with a CTA). 

4

C. The CFTC’s Ability to Regulate Lake Shore Limited’s Activities as a CTA

and CPO

This court has jurisdiction because the CFTC filed suit under 7 U.S.C. § 13-1(a), which

provides that, “[w]henever it shall appear to the Commission that any registered entity or other

person has engaged, is engaging, or is about to engage in any act or practice constituting a

violation of any provision of this chapter or any rule, regulation, or order thereunder, or is

restraining trading in any commodity for future delivery, the Commission may bring an action in

the proper district court of the United States ... to enjoin such act or practice, or to enforce

compliance with this chapter, or any rule, regulation or order thereunder, and said courts shall

have jurisdiction to entertain such actions ....” Venue is proper in this district because Lake

Shore Limited has offices in Chicago. See 7 U.S.C. § 13-1(e). 

Lake Shore Limited is a “registered entity” because on January 17, 2007, it registered as a

CPO and CTA with the CFTC. See 7 U.S.C. § 1a(5) (defining a CPO); 7 U.S.C. § 1a(6)

(defining a CTA). As discussed above, Lake Shore Limited was a mere continuation of the Lake

Shore common enterprise, which included Lake Shore Inc., which also was a CFTC registrant

and NFA member.

Above and beyond Lake Shore Limited and Lake Shore Inc.’s status as CFTC registrants,

Lake Shore Limited’s promotional materials repeatedly state that it is doing business as a CFTC

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 48 of 86
 More specifically, account opening documents at Man for Lake Shore Alternative 5

Financial Asset Fund IV, Ltd. dated March 26, 2007, state that this company is authorized by the

NFA. The document then provides Lake Shore Limited’s NFA identification number.

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registrant and NFA member, that it is the trading manager for the Lake Shore Alternative

Financial Asset Funds, and that it is a registered CPO and CTA. Lake Shore Limited’s

documents also indicate that the Lake Shore Alternative Financial Asset Funds would trade

commodity futures contracts on U.S. exchanges, and contracts were traded on U.S. exchanges

including the Chicago Mercantile Exchange, the Chicago Board of Trade, and the New York

Mercantile Exchange. In addition, Lake Shore Limited told at least one FCM that it was a NFA

member. Next, the account statements from Fimat, Lehman and Man and the funds’ fact sheets 5

show that the funds in fact traded at least in part on U.S. exchanges. Finally, a substantial

amount of losses at Man, Fimat and Lehman (the only three trading accounts for the Lake Shore

Alternative Financial Asset Funds) occurred as the result of trading on U.S. futures exchanges. 

Lake Shore Limited nevertheless contends that the fact that the trading FCMs are located

in London and it is a Bermuda corporation means that the CFTC is overstepping its bounds when

it seeks Lake Shore Limited’s records. In the seminal case of Tamari v. Bache & Co. (Lebanon)

S.A.L., 730 F.2d 1103 (7th Cir. 1984), the Seventh Circuit confronted a similar argument, as the

defendant contended that the court lacked subject matter jurisdiction under the Act over a dispute

between nonresident aliens involving trades within the United States because the parties’ other

contacts took place outside the country. Id. 

The Seventh Circuit held that subject matter jurisdiction over international disputes

concerning commodity futures transactions exists if either the “conduct” or “effects” tests are

met. Id. at 1108; Pyrenee, Ltd. v. Wocom Commodities, Ltd., 984 F.Supp. 1148, 1155 (N.D. Ill.

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 49 of 86
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1997) (collecting cases holding that the tests are alternative). The conduct test focuses on

conduct within the United States that relates to the alleged fraud and authorizes jurisdiction when

that conduct “is material to the successful completion of the alleged scheme.” Id. In turn, the

effects test considers whether foreign activities have “caused foreseeable and substantial harm to

interests in the United States.” Id. 

To establish jurisdiction under the conduct test, the plaintiff must point to some United

States activity by the defendant. Mak v. Wocom Commodities Ltd., 112 F.3d 287, 289 (7th Cir.

1997); Tamari v. Bache & Co. (Lebanon) S.A.L., 730 F.2d at 313. Although Lake Shore Limited

and the other Lake Shore companies are not incorporated in the United States, activities relating

to the alleged scheme to defraud occurred in the United States. See Mak v. Wocom Commodities

Ltd., 112 F.3d at 289 (“the transmission of commodity futures orders to the United States from

foreign parties is an essential step in the consummation of any scheme to defraud through futures

trading on the United States exchanges.”). As will be discussed in detail below, the evidence

demonstrates that the CFTC has a likelihood of establishing that Lake Shore Limited used U.S.

exchanges to facilitate a fraud, even if the individual transactions themselves were not fraudulent. 

Accordingly, Lake Shore’s attempt to distinguish the Tamari case based on the fact that no

evidence shows that the individual transactions themselves were fraudulent is unpersuasive.

Moreover, Lake Shore Inc., which was part of the Lake Shore common enterprise, and

Lake Shore Limited, the continuation of the Lake Shore common enterprise, were both CFTC

registrants and, as discussed in more detail below, acted as CTAs and CPOs in connection with

the Lake Shore Alternative Financial Asset Funds. The CFTC has jurisdiction to address the

conduct of its own registrants. See 7 U.S.C. § 2(a)(1)(A); Merrill Lynch, Pierce, Fenner &

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 50 of 86
 In this regard, it is disingenuous for Lake Shore Limited to repeatedly tout its status as a 6

CFTC registrant and NFA member in its marketing materials to lend credibility to its operations

and then contend that the CFTC lacks jurisdiction to regulate its activities. Indeed, in addition to

the numerous representations about its CFTC registration and NFA membership, Lake Shore

Limited’s Alternative Investment Due Diligence Questionnaire even advised future clients that

“[r]elying on statements from Lake Shore and its regulatory history provides the comfort

available,” as opposed to receiving redacted information about performance from past or existing

clients. 

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Smith, Inc. v. Curran, 456 U.S. 353, 360-67 (1982) (discussing history of the Act and noting that

it grants broad powers to the CFTC to administer and enforce the Act).6

Lake Shore Limited’s status as a Bermuda corporation, its use of FCMs in London, and

the presence of foreign investors or foreign brokerage firms therefore do not somehow turn this

case into an effort by the CFTC to regulate foreign futures trading. In other words, the CFTC is

not, contrary to Lake Shore Limited’s assertion, trying to use the Act to investigate foreign

companies associated with Lake Shore Limited that are outside the jurisdiction of this court and

the CFTC under the Act. See Kauthar SDN BHD v. Sternberg, 149 F.3d 659, 667 (7th Cir. 1998)

(in analogous securities fraud context, stating that the court must distinguish between “situations

in which the United States is being used as a launching pad for fraudulent international securities

schemes” and “disputes which have little in the way of a significant connection to the United

States” and holding that jurisdiction is proper if conduct within the U.S. “forms a substantial part

of the alleged fraud and is material to its success”). 

This is especially true given that the court is considering whether to grant a preliminary

injunction and the record reflects trading activity in the U.S. and actions taken as a CTA and

CPO. On the other side of the balance, Lake Shore Limited argues that its U.S. activities are

insubstantial compared to its foreign activities, but does not offer any evidence supporting such

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 51 of 86
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an inference except its claim that its only U.S. activity involves the single U.S. investor who

invested in a U.S. feeder fund, which the court has rejected. In short, the court finds that the

CFTC has met its burden of showing that Lake Shore Limited’s U.S. activities are sufficient to

confer jurisdiction under the Act.

D. Lake Shore Limited’s Records

Section 4n(3)(A) of the Commodity Exchange Act, 7 U.S.C. § 6n(3)(A), provides:

Every commodity trading advisor and commodity pool operator registered under

this chapter shall maintain books and records and file such reports in such form

and manner as may be prescribed by the Commission. All such books and records

shall be kept for a period of at least three years, or longer if the Commission so

directs, and shall be open to inspection by any representative of the Commission

or the Department of Justice. Upon the request of the Commission, a registered

commodity trading advisor or commodity pool operator shall furnish the name

and address of each client, subscriber, or participant, and submit samples or

copies of all reports, letters, circulars, memorandums, publications, writings, or

other literature or advice distributed to clients, subscribers, or participants, or

prospective clients, subscribers, or participants.

See also 17 C.F.R. § 1.31 (keeping and inspection of books and records).

Lake Shore Limited has produced certain records relating to its single U.S. investor and

the single U.S. Fund (Fund IV–U.S.). The CFTC contends that this is not enough and that Lake

Shore Limited must also allow inspection of Lake Shore Limited’s records as well as records of

other Lake Shore entities. 

1. Lake Shore Limited’s Production of its Own CTA/CPO Records PostDating its CFTC Registration

The Act’s record keeping requirements apply to CTAs and CPOs registered with the

CFTC. Thus, for an entity to be liable under the record keeping provision, the record must show

that it: (1) was registered as either a CPO or a CTA, and (2) was acting as either a CPO or a

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 52 of 86
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CTA. New York Currency Research Corp. v. Commodity Futures Trading Com’n, 180 F.3d 83,

89 (2d Cir. 1999). It is undisputed that on January 17, 2007, Lake Shore Limited became

registered with the CFTC as a CTA and CPO to do business within the United States. Lake

Shore Limited, however, claims that it never acted as a CTA or CPO due to the filing of this

action.

A CTA is:

(A) ... any person who – 

(I) for compensation or profit, engages in the business of advising others,

either directly or through publications, writings, or electronic media, as to

the value of or the advisability of trading in –

(I) any contract of sale of a commodity for future delivery made or

to be made on or subject to the rules of a contract market or

derivatives transaction execution facility;

(II) any commodity option authorized under section

6c of this title; or

(III) any leverage transaction authorized under section 23 of this

title; or

(ii) for compensation or profit, and as part of a regular business, issues or

promulgates analyses or reports concerning any of the activities referred to

in clause (I).

(B) Exclusions. Subject to subparagraph (C), the term “commodity trading

advisor” does not include – 

(I) any bank or trust company or any person acting as an employee

thereof;

(ii) any news reporter, news columnist, or news editor of the print or

electronic media, or any lawyer, accountant, or teacher;

(iii) any floor broker or futures commission merchant;

(iv) the publisher or producer of any print or electronic data of general and

regular dissemination, including its employees;

(v) the fiduciary of any defined benefit plan that is subject to the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.);

(vi) any contract market or derivatives transaction execution facility; and

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 53 of 86
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(vii) such other persons not within the intent of this paragraph as the

Commission may specify by rule, regulation, or order.

(C) Incidental services. Subparagraph (B) shall apply only if the furnishing of

such services by persons referred to in subparagraph (B) is solely incidental to the

conduct of their business or profession.

(D) Advisors. The Commission, by rule or regulation, may include within the

term “commodity trading advisor”, any person advising as to the value of

commodities or issuing reports or analyses concerning commodities if the

Commission determines that the rule or regulation will effectuate the purposes of

this paragraph.

7 U.S.C. § 1a(6)

In turn:

The term “commodity pool operator” means any person engaged in a business that

is of the nature of an investment trust, syndicate, or similar form of enterprise, and

who, in connection therewith, solicits, accepts, or receives from others, funds,

securities, or property, either directly or through capital contributions, the sale of

stock or other forms of securities, or otherwise, for the purpose of trading in any

commodity for future delivery on or subject to the rules of any contract market or

derivatives transaction execution facility, except that the term does not include

such persons not within the intent of the definition of the term as the Commission

may specify by rule, regulation, or order.

7 U.S.C. § 1a(5).

The documents in this case are replete with representations by Lake Shore Limited that it

is the trading manager for the Lake Shore Alternative Financial Asset Funds as well as a CFTCregistered CTA and CPO, and that Lake Shore Limited is the reorganized version of Lake Shore

Inc. Importantly, the evidence also shows that Lake Shore Limited acted on behalf of all of the

Lake Shore Funds/Lake Shore Alternative Asset Funds, not just Fund IV-U.S. The court finds

that this evidence establishes that Lake Shore Limited acted as a CTA because it was engaged in

the business of directly advising others regarding the value of or the advisability of trading in the

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 54 of 86
 The court also clarifies that Lake Shore Limited’s emphasis on the fact that the Lake 7

Shore Funds are located outside the U.S. is misplaced. The correct focus is on Lake Shore

Limited and what it did in its capacity as a CFTC-registered CTA and CPO with respect to the

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futures market. Similarly, it establishes that Lake Shore Limited acted as a CPO because it was

engaged in a business that is of the nature of an investment trust, syndicate, or similar form of

enterprise, and in connection therewith, solicited, accepted, or received funds from others for the

purpose of engaging in futures trading.

The only contrary evidence about Lake Shore Limited’s status as the Lake Shore

Alternative Financial Asset Funds’ CTA is Mr. Baker’s testimony via declaration that Lake

Shore Group intended Lake Shore Limited to act as the funds’ investment advisor, but this plan

was not carried out as a result of this action and a parallel action by the NFA. This declaration

does not address Lake Shore Limited’s representations in its own documents supporting an

inference that it acted as a CPO. 

The court also finds that Mr. Baker’s assertion that Lake Shore Limited never acted as the

funds’ CTA is incredible. Specifically, FCM records show that the accounts for the Lake Shore

Alternative Financial Asset Funds were being traded in 2007 through the date of the original

asset freeze (which was subsequently vacated) and the ongoing NFA asset freeze. Thus, the

filing of this action and the NFA action in June of 2007 post-date substantial amounts of trading

activity earlier in 2007. In addition, numerous Lake Shore documents showing that Lake Shore

Limited was the Lake Shore Alternative Financial Asset Funds’ CTA and CPO predate the

institution of this action and the separate NFA action. The court infers from these facts that Lake

Shore Limited acted as the funds’ CTA and the CPO, given the complete lack of any credible

evidence to the contrary. 

7

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 55 of 86
funds, not the funds’ physical location or place of incorporation. 

 In this regard, the court again notes that Lake Shore Limited’s position that all relevant 8

activities occurred outside the U.S. and that it did not engage in any activities in the U.S. that

were essential to the completion of the alleged misrepresentations is incorrect, given the court’s

finding that Lake Shore Limited acted as a CFTC-registered trading advisor and pool operator, 

the uncontroverted evidence that a portion of the funds’ trading occurred on U.S. exchanges, and

counsel’s acknowledgment that his client acted as a trading advisor. Lake Shore Limited appears

to want to have it both ways: when it believes that it is helpful to its cause to characterize itself as

a trading advisor, it does so. However, when that position is contrary to its desired result, it

reverses course and states that its only activity in the U.S. involves a single U.S. investor who

invested in a U.S. feeder fund. The court feels constrained to note that this type of shift in

position (which is illustrative of Lake Shore Limited’s litigation strategy to date as opposed to an

isolated incident) makes it difficult to rely on any factual representations made by counsel. The

court does not make this comment lightly, and hopes that counsel takes it to heart.

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Finally, even Lake Shore Limited’s counsel admitted that his client was a CTA, stating in

his opening statement that the evidence would show that “[t]o the extent Lake Shore Limited had

a role in the activity that will be discussed in this hearing, it was a trading adviser making trading

decisions.” (Tr. 15:18-20). This concession is amply supported by the only believable evidence

in the record regarding the CTA issue. See Specialized Seating, Inc. v. Greenwich Industries,

L.P., 472 F.Supp.2d 999, 1006 (N.D. Ill. 2007) (recognizing that counsel had conceded a fact

during his opening statement). 

8

Thus, Lake Shore Limited must allow inspection of its books and records relating to the

Lake Shore Alternative Financial Asset Funds in their entirety as of the date of its CFTC

registration. In the interests of staving off future disputes, the court clarifies this statement by

noting that this means all of its books and records kept in connection with its activities as a CTA

and CPO for the Lake Shore Alternative Financial Asset Funds, not just the records relating to

Fund IV – U.S. and the single U.S. investor. See 7 U.S.C. § 6n; 17 C.F.R. §§ 1.31 (inspection);

4.22 (CPO records); 4.33 (CTA records). 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 56 of 86
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The court also notes that Lake Shore Limited’s proffered authority to the contrary is

inapposite. Lake Shore Limited directs the court’s attention to New York Currency Research

Corporation v. CFTC, characterizing it as holding that “foreign currency records need not be

produced because they were outside the firm’s CTA and CPO registrations.” Lake Shore

Limited’s Proposed Findings of Fact & Conclusions of Law at 20. This is a mischaracterization

of the New York Currency case. In that case, the petitioner was an off-exchange foreign currency

trader who was also a registered CTA and CPO for the relevant time period. New York Currency

Research Corporation v. CFTC, 180 F.3d at 86. The Second Circuit found that the CFTC failed

to produce any evidence indicating that the petitioner ever acted in the capacity as a CTA or CPO

and its registration by itself was not enough to trigger record keeping obligations under 17 C.F.R.

§§ 4.23 or 4.33. Id. at 91. The Second Circuit then considered whether the petitioner had an

obligation, independent of its registration as a CTA and CPO, to maintain records, and concluded

that the failure to show that the petitioner acted as a CTA and CPO meant that it was not subject

to 17 C.F.R. §§ 4.23 or 4.33. Id. at 92.

The New York Currency opinion thus actually supports the proposition that registration

plus activity as a CTA and/or CPO triggers the record keeping obligations in 17 C.F.R. §§ 4.23

or 4.33. The court is not requiring Lake Shore Limited to produce records of all of its activities,

whether or not those activities involved CTA or CPO activity. See New York Currency Research

Corporation v. CFTC, 180 F.3d at 91. Instead, it is requiring Lake Shore Limited to produce

records kept in its capacity as the CTA and CPO for the Lake Shore Alternative Financial Asset

Funds. The fact that some of these records may relate to foreign transactions does not shield

them from production since Lake Shore Limited’s obligation to keep and produce its records

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 57 of 86
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arose from its actions as the CTA and CPO for the Lake Shore Alternative Financial Asset

Funds. See id.

At the risk of being repetitive, the court reiterates that the fact that the Lake Shore

Alternative Financial Asset Funds themselves and the vast majority of the investors are outside

the U.S. is irrelevant. Lake Shore Limited’s record keeping obligations flow from its activities as

a CTA and CPO under the Act. The court is not ordering the funds themselves or the investors to

do anything. Instead, its order is exclusively directed at Lake Shore Limited. If Lake Shore

Limited did not want to subject itself to the jurisdiction of the CFTC and this court, it should not

have registered with the CFTC as a CTA and CPO, provided advice and management wearing

the hat of a CFTC-registered CTA which led to trading on U.S. exchanges, and operated the Lake

Shore Alternative Financial Asset Funds and solicited investors wearing the hat of a CFTC

registered CPO. Having done so for all of the Lake Shore Alternative Financial Asset Funds,

however, its obligation to keep and produce records is not limited to the single U.S. investor or

Fund IV–U.S. 

2. The SMA Records

 This brings the court to Lake Shore Funds I, II, III, and IV. Lake Shore I and II consist in

part of SMAs. The court has virtually no information about the SMAs, so it cannot ascertain

whether the related records are subject to production under the reasoning set forth in the

preceding section. Given the prior history relating to document production and Lake Shore

Limited’s willingness to adopt what can only be characterized as extremely aggressive and

cabined interpretations of its obligations, the court declines to blindly accept Lake Shore

Limited’s statement that the SMA records are not subject to production. If Lake Shore Limited

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 58 of 86
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does not produce the records, the CFTC and the court have no way of knowing if Lake Shore

Limited’s position regarding non-production of these records is well-founded and the interests of

justice cannot be served. 

There is only one solution: someone other than Lake Shore Limited must review the

records to determine if Lake Shore Limited’s contention that they relate exclusively to non-U.S.

investors trading outside the U.S. on non-U.S. exchanges with no connection to Lake Shore

Limited or Lake Shore Inc. in their capacities as CTAs or CPOs is correct. Since relying on Lake

Shore Limited’s assertions with no means of review is off the table, the court suggests that a

viable solution would be to allow CFTC counsel to review the records with an attorneys’ eyes

only designation at Lake Shore Limited’s offices. If Lake Shore Limited is not agreeable,

appointing a special master at Lake Shore Limited’s expense is another possibility. See Fed. R.

Civ. P. 53; Trans Union, LLC. v. Credit Research, Inc., No. 00 C 3885, 2003 WL 1338131, at *2

(N.D. Ill. Mar. 11, 2003) (where the court was “painfully aware of the complexities” arising from

analysis of data and the issues were “sufficiently complicated to require the aid of an auditor,” 

case was exceptional and warranted use of a special master). The court is open to all reasonable

suggestions, and encourages the parties to meet and confer prior to filing a joint memorandum by

September 4, 2007, regarding this issue. If this is not possible, they may file separate

memoranda.

3. Records of Lake Shore Inc. and Lake Shore Group Prior to Lake

Shore Limited’s Registration as a CPO and CTA

As discussed above, Lake Shore Limited is a mere continuation of Lake Shore Inc., which

was registered CTA and CPO until its registrations were withdrawn in February of 2007, and

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 59 of 86
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Lake Shore Inc. was part of the Lake Shore Group. According to the fact sheets for all of the

Lake Shore Alternative Financial Asset Funds, Lake Shore funds were trading as of January of

1994 (Lake Shore Alternative Financial Asset Fund I and Lake Shore Alternative Financial Asset

Fund Yen Fund, which both had the new 5% risk model introduced in 2003), January of 2005

(Lake Shore Alternative Financial Asset Fund II and Lake Shore Alternative Financial Asset

Fund Yen Fund Class II), May of 2006 (Lake Shore Alternative Financial Asset Fund III and

Lake Shore Alternative Financial Asset Fund Yen Fund Class III), February of 2007 (Lake Shore

Alternative Financial Asset Fund IV), and May of 2006 (Lake Shore Alternative Financial Asset

Fund IV Class E). (Plt. Ex. 19).

Clearly, someone was acting as the CPO and CTA for all of these funds from 1994 to

Lake Shore Limited’s taking over of those responsibilities in January of 2007. But, was Lake

Shore Inc. the CTA and CPO? Mr. Church was a principal for an entity called Lake Shore Inc.,

and stated that this entity was formed in 1996. He testified via declaration that Mr. Baker

approached him in 2000 or 2001 with a business concept (soliciting firms and securities brokers

to interest them in getting clients to invest in commodity futures) using the Lake Shore Inc.

name. According to Mr. Church, he was not interested because he thought the concept was not

compliant with U.S. law, but he eventually agreed to sell the Lake Shore Inc. name to Mr. Baker

in 2006.

If the court credits Mr. Church’s testimony, the Lake Shore Inc. entity associated with Mr.

Church’s CTA and CPO registrations was not affiliated with the Lake Shore Group. This is

consistent with the fact that the name Lake Shore Inc. (as used by the Lake Shore Group) was

actually the firm name for Lake Shore Alternative Investment, which was 100% owned by Senior

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 60 of 86
 Lake Shore Limited appears to be claiming that it began to act as the CPO and CTA for 9

the Lake Shore Funds in January of 2007 as a tabula rasa with no idea who the prior CTA and

CPO were. The court finds that this position is untenable, so discovery should provide additional

confirmation as to the identity of the prior CTA and CPO. 

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Management of Lake Shore Asset Management, whose management overlaps with that of Lake

Shore Limited. Moreover, the Pitch as well as the fund fact sheets show that Lake Shore was

using the Lake Shore Inc. name and Lake Shore’s proprietary trading model at least as early as

2003, and that Lake Shore (apparently, as the Lake Shore Group’s Lake Shore Inc., as opposed to

Mr. Church’s Lake Shore Inc.) had been trading prior to that date. 

The reader will recall that the Lake Shore Group is a common enterprise containing (at

least at one time), among other entities, an entity holding itself out as Lake Shore Inc. In

addition, Lake Shore Limited is a mere continuation of the Lake Shore Group’s Lake Shore Inc.

(as opposed to Mr. Church’s Lake Shore Inc., to the extent that the court credits his testimony). 

Lake Shore Limited is also part of the Lake Shore Group common enterprise. Mr. Brodersen

acknowledged that Lake Shore Limited became registered to do business in the United States on

January 17, 2007, and thus is not expected to possess records prior to this date. 

This means that Lake Shore Limited is not expected to possess records prior to January

17, 2007, in its capacity as Lake Shore Limited. In contrast, it would be expected to possess

records in its previous incarnation as Lake Shore Inc., as part of the Lake Shore Group common

enterprise, and as the acting CTA and CPO for the Lake Shore funds. It thus must allow

inspection of any CTA and CPO records predating January 17, 2007, to the extent that those

records are subject to production as discussed in the preceding section.9

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 61 of 86
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In conclusion, the court notes that document production is not an elaborate game of hide

the ball. This is not a criminal case where the CFTC is required to prove its claims with proof

beyond a reasonable doubt while Lake Shore Limited stands by and withholds all of its records. 

As set forth above, Lake Shore Limited is required to maintain certain documents as a CPO and

CTA in connection with its CTA and CPO activities, and must allow inspection of those

documents. In the event that Lake Shore Limited believes that certain documents are outside the

scope of this order, retention of documents at Lake Shore Limited’s discretion and with no means

of verifying the veracity of Lake Shore Limited’s position is unacceptable. As with the SMA

records, the documents must be reviewed by someone other than Lake Shore Limited. Thus, the

parties are directed to include a discussion of this issue in the memorandum addressing the SMA

records issue if necessary.

E. Financial Analysis/Fraud

1. The Act

Under the Act, the CFTC may establish futures fraud by showing that a defendant made

material misrerpresentations or omissions. 7 U.S.C. §§ 6b(a)(2)(I), (ii), (iii) & 6o(1)(A), (B); see

also Slusser v. CFTC, 210 F.3d 783 (7th Cir. 2000); Com’n v. Rosenberg, 85 F. Supp.2d 424,

447 (D.N.J. 2000). Material misrepresentations or omissions may consist of a variety of acts. 

For instance, misrepresentations about experience, historical success, and profitability are

material and may constitute fraud. See Com’n v. White Pine Trust Corp., No. 04CV2093

J(NLS), 2007 WL 1121249, at *9 (S.D. Cal. Apr. 11, 2007) (“Misrepresentations regarding the

experience or profitability of a firm or account manager are material because historical success

and experience would be considered extremely important factors to a reasonable investor when

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 62 of 86
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deciding to invest”); Com’n v. Valko, No. 06-60001-CIV, 2006 WL 2582970, at *4 n.1 (S.D. Fla.

Aug. 16, 2006) (false reports of profitability with respect to commodity futures trading accounts

constitute a violation of 7 U.S.C § 6b(a)(2)(ii)); Com’n v. Noble Wealth Data Info. Serv., Inc., 90

F. Supp.2d 676, 686 (D.Md. 2000) (defendant’s profit claims constituted false reports and fraud

within the meaning of the Act), aff'd in part, vacated in part, sub nom. Com’n v. Baragosh, 278

F.3d 391 (4th Cir. 2002); Com’n ex rel. Kelley v. Skorupskas, 605 F. Supp. 923, 932-33 (E.D.

Mich. 1985) (defendants violated § 4b(a) and § 4o(1)of the Act by issuing false monthly

statements to customers). 

2. Amount Under Management and Purported Profitability

Prior to addressing the CFTC’s concerns about Lake Shore Limited’s representations

regarding the amount under management and its profitability, the court will provide a recap of

the structure of the Lake Shore Funds.

I. Structure of the Funds

It is said that a picture is worth a thousand words, so the reader is invited to refer back to

the court’s summary chart attached as exhibit 1 hereto as an aid in understanding Lake Shore’s

structure and assets, and the conclusions to be drawn therefrom. In general, the parties and

witnesses refer to Lake Shore Funds I, II, III, and IV without specifying whether they mean Lake

Shore Funds I, II, III, and IV or Lake Shore Alternative Financial Asset Funds I, II, III, and IV. 

As shown by the chart, however, they are not substantively interchangeable. 

Specifically, Lake Shore I and II are comprised of SMAs and funds, while Lake Shore III

and IV are comprised exclusively of funds. The funds that form or are part of Lake Shore Funds

I, II, III, and IV are Lake Shore Alternative Financial Asset Fund I (which includes the Lake

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 63 of 86
 The court also rejects Lake Shore Limited’s suggestion that the Lake Shore Funds also 10

were trading using accounts in the name of FTG, because Mr. Brodersen testified that if this was

allowed, it would have to have been disclosed, and no such disclosures were made.

 This conclusion is based on the evidence presently before the court, as the CFTC 11

referred to the Lake Shore Funds and the Lake Shore Alternative Financial Asset Funds

interchangeably in its submissions. The court thus has not confronted the potential issue of

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Shore Alternative Financial Asset Yen Fund), as well as Lake Shore Alternative Financial Asset

Funds II, III, and IV. Lake Shore Alternative Asset Accounts I and II are part of the SMAs that

in turn are part of Lake Shore I and II. 

The court has accepted Mr. Baker and Mr. Rosenthal’s statements, which are supported

by numerous Lake Shore documents, that the only FCMs for any Lake Shore Funds (i.e., Lake

Shore Alternative Financial Asset Funds I, II, III, and IV) are Fimat, Lehman, Man, and Sentinel. 

Fimat, Lehman, and Man have all of the Lake Shore Alternative Financial Asset Funds’ trading

accounts. All four of the FCMs turned the Lake Shore records in their possession over to the 10

CFTC and/or the NFA. With this in mind, the court turns to the amount under management,

Lake Shore Limited’s profitability, questionable transfers between accounts, and Lake Shore

Limited’s access to funds.

ii. Amount Under Management – Lake Shore Funds

Based on evidence currently before the court, the amounts in Lake Shore Funds I, II, III,

and IV add up to $1.05B (to the extent that the figures provided by Lake Shore Limited are

accurate). This explains why the amounts in Lake Shore Alternative Financial Asset Funds I, II,

III, and IV – which are only part of Lake Shore Funds I, II, III, and IV – do not add up to $1.05B. 

Thus, the court rejects the CFTC’s claim that the fact that the amounts in Lake Shore Alternative

Financial Asset Fund Funds I, II, III, and IV do not add up to $1.05B is a misrepresentation.11

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 64 of 86
whether Lake Shore Limited misrepresented the amount under management in the Lake Shore

Alternative Financial Asst Funds by making it appear that those funds were actually the Lake

Shore Funds, which purportedly have much more money in them.

 More specifically, the record contains evidence relating to one account for Lake Shore 12

Alternative Asset Account II at Sentinel, which is part of the SMA portion of Lake Shore II. 

-65-

To verify the $1.05B figure, which is the total amount under management for the Lake

Shore Funds I, II, III, and IV, auditors would need to verify the amounts in the SMAs. Lake

Shore Limited has refused to turn over its records, and the accounts for the SMAs are not with

the four FCMs who have given their records to the CFTC/NFA. The lack of information about 12

the SMAs means that it is impossible to add up the amount under management to ascertain if

Lake Shore Limited’s claim that the Lake Shore Funds manage a total of $1.05B is correct. This

issue will have to wait for another day.

iii. Amount Under Management and Profitability – Lake Shore

Alternative Financial Asset Funds

The court’s ability to assess the amount under management and purported profitability for

the Lake Shore Alternative Financial Asset Funds does not suffer from this defect (i.e., lack of

information about the SMAs) because the FCMs with Lake Shore trading accounts produced

their records to the CFTC, and those records are for the Lake Shore Alternative Financial Asset

Funds. More specifically, the Lake Shore Alternative Financial Asset Funds’ track records

confirm if they were profitable, and marketing materials from the various Lake Shore entities

made representations about the alleged profitability of the Lake Shore Alternative Financial

Asset Funds, not the Lake Shore Funds. This is a critical fact, as the reader will recall that Lake

Shore Funds I and II consist of SMAs plus Lake Shore Alternative Financial Asset Funds I and

II, while Lake Shore Funds III and IV consist only of Lake Shore Alternative Financial Asset

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 65 of 86
 Lake Shore Limited vigorously argues that its account naming conventions (featuring 13

account names on its website that did not consistently match the names of the accounts at the

FCMs and accounts that did not consistently have corresponding trading accounts with matching

names) mean that Mr. Brodersen’s analysis of the Lake Shore accounts is untrustworthy. It must

be noted, however, that Lake Shore Limited refused to explain its account naming conventions to

the NFA. Moreover, Mr. Brodersen testified that Lake Shore Limited’s highly unusual account

naming system did not impact his ability to identify accounts or track the performance of those

accounts. He did, however, state that in his 21 years of auditing commodity pools, he had never

encountered the kind of naming conventions like those used by Lake Shore Limited.

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Funds III and IV. The reader will also recall that Lake Shore Limited was the CTA and CPO for

the Lake Shore Alternative Financial Asset Funds. 

Thus, the results touted by the Lake Shore entities are for the Lake Shore Alternative

Financial Asset Funds, which use Lake Shore Limited as their CTA and/or CPO and are either

traded via FCMs Fimat, Man, and Lehman, or invested with FCM Sentinel. All four of these

FCMs provided records to the CFTC and/or the NFA. This means that the lack of evidence

about the SMAs is irrelevant, because those accounts do not affect the trading performance of the

Lake Shore Alternative Financial Asset Funds, which is reflected in its entirety in the FCM

records which the CFTC’s witnesses analyzed.13

When Mr. Brodersen eliminated double counting of assets which had occurred based on

his initial review of the information gained from screenshots from Lake Shore Limited’s

computers, he obtained a 2007 total as of the date of his calculations for the Lake Shore

Alternative Financial Asset Funds in an amount between $275M and $288M as of June 11, 2007. 

Lake Shore Limited’s marketing materials (attached to Plt. Ex. 15) generally corroborate that

amount, as Lake Shore Limited represented that the total in the Lake Shore Alternative Financial

Asset Funds as of June 2007 adds up to $293M. 

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During the July 2, 2007, conference call between the CFTC/NFA and Lake Shore

Limited, Mr. Baker indicated that approximately $230M was invested in the Lake Shore

Alternative Financial Asset Funds. It thus appears that there is an unexplained discrepancy of

close to $60 million between June 11, 2007 and July 2, 2007.

Despite the time disparity, the court is extremely troubled by this significant drop in the

total amount in all of the Lake Shore Alternative Financial Asset Funds. The drop is shown by

evidence in the record, while Lake Shore Limited did not introduce any concrete evidence that

would explain it. Instead, it attempted to explain the difference via cross-examination by

blaming fund of fund transfers, noting that the FCM records were not all from the same date,

pointing to differences in the exchange rate, and positing, with no evidentiary support whatsoever

that despite overwhelming evidence to the contrary, Lake Shore Limited and Lake Shore Inc.

could have used additional FCMs which would make Mr. Brodersen’s calculations unreliable.

• Transfers Between Funds – Mr. Brodersen testified that even if funds were being

transferred between the various funds, the overall amount would all even out in

the end. In other words, if Fund X transferred $20M to Fund Y, it would net out

because Fund X would be $20M in the red and Fund Y would be $20M in the

black. It cannot be stressed strongly enough that the CFTC and NFA have FCM

records for all of the Lake Shore Alternative Financial Asset Funds. Thus, even if

monies were being transferred between the various funds, it should net out. Thus,

Mr. Brodersen concluded that even without information about all possible fund of

fund transfers, overall profitability was the critical inquiry. He then noted that the

Lake Shore Alternative Financial Asset Funds had lost money overall, despite

Lake Shore’s representation that all of the Lake Shore Alternative Financial Asset

Funds were profitable. 

• Differences in Dates – Mr. Brodersen used FCM records from May, June, and

July of 2007. It is possible that Lake Shore Limited suffered significant losses in

this period, and merely suffering losses, no matter how large, does not show fraud. 

However, as of 2003, Lake Shore Group instituted a risk management overlay

consisting of a systemwide 5% monthly drawdown limit with no discretion. Lake

Shore Limited uses this same proprietary model, and its due diligence represents

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 67 of 86
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that it will have a maximum monthly drawdown of 5%, and that this strategy has

been successful for more than 39 months. 

Lake Shore Group’s May of 2007 fact sheets for Lake Shore Alternative Financial

Funds I, II, III, and IV have monthly returns listed which are consistent with this

alleged overlay. With $230M invested in the Lake Shore Alternative Financial

Asset Funds, the maximum loss for three months using the mandatory 5% overlay

represented by Lake Shore Limited cannot explain all of the missing $60M. Thus,

while there are no guarantees in life, particularly in the highly volatile world of

futures trading, the existence of the non-discretionary 5% monthly drawdown

limit represented in the Lake Shore Limited documents is inconsistent with the

numbers Mr. Brodersen calculated. 

• Similarly, Mr. Brodersen’s audit of the FCM records reflects that Lake Shore

Alternative Financial Asset Fund II showed monthly trading losses of greater than

5%/month for four of nine months between October 2006 and June of 2007

(-5.45% , -17.03%, -9.71%, and -20.20%). Similarly, Lake Shore Alternative

Financial Asset Fund I shows trading losses for March through May of 2007 that

are substantially higher than 5% (-39.08%, -21.19%, and -70.87%). While trading

losses by themselves do not show fraud, the losses are inconsistent with

representations made by Lake Shore Limited about the mandatory risk overlay.

• Exchange Rate – Lake Shore Limited has presented no evidence as to changes in

the exchange rate to support its position that these changes are the root, at least in

part, for the discrepancies. It also has not explained how unspecified changes in

the exchange rate could lead to such a dramatic shift.

• Mystery FCMs – Mr. Baker, Mr. Rosenthal, and the vast majority of Lake Shore

Limited and Lake Shore Group’s records state that all of the Lake Shore

Alternative Financial Funds use Fimat, Sentinel, Man, and Lehman as FCMs. 

Lake Shore Limited has not provided any evidence indicating that there in fact

were any other FCMs. Moreover, Mr. Brodersen testified that even if Mr. Baker

was doing business in Europe under the name FTG, if any of the Lake Shore

Funds invested in an account in the name of FTG, if it was allowed, it would have

to have been disclosed. The record does not show that this ever happened. 

Similarly, no evidence shows that Lake Shore Group traded in Europe under a

different name such as FTG, or had trading accounts in FTG’s name. Lake Shore

Limited’s counsels’ speculation that Lake Shore Group traded under another name

and had additional trading accounts under that name is not evidence. In contrast,

the CFTC has pointed to ample evidence indicating that Lake Shore Group and

Lake Shore Limited only used the four FCMs specified by Mr. Baker and Mr.

Rosenthal.

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Fundamentally, Lake Shore Limited’s position boils down to its contention that the CFTC

and NFA lack the necessary documents to audit its trading history. As discussed above, once the

Lake Shore Funds (two of which include SMAs) are distinguished from the Lake Shore

Alternative Financial Asset Funds (which do not include SMAs), this position is unfounded. In

any event, Lake Shore Limited’s missing records argument is unpersuasive because it cannot use

its own decision not to produce records as both a sword and a shield. Just as the court cannot

infer that Lake Shore Limited’s documents contain damaging evidence, it is not required to infer

that they contain exonerating evidence. 

Similarly, the fact that the CFTC witnesses stated that it would be possible for their

analysis to change if Lake Shore Limited produced its records does not persuade the court to

accept Lake Shore Limited’s invitation to jettison their testimony. The fact that it is possible for

the analysis to change does not shed any light on how probable such a change might be. The

record shows that the probability of such a change occurring is at best de minimis due to Mr.

Brodersen’s testimony that the regulators were particularly interested in reviewing trading

records prepared by third parties (i.e., the FCMs) because of the reliability of obtaining

information from an outside source. In other words, reviewing Lake Shore Limited’s records

will provide a fuller picture of its activities, but the absence of its records does not somehow

make the FCM records unreliable.

In sum, after balancing the CFTC’s evidence against Lake Shore Limited’s crossexamination of the CFTC witnesses, the court concludes that Lake Shore Limited’s attacks on the

CFTC’s witnesses are either unmerited or unpersuasive. Lake Shore Limited’s refusal to produce

its records, the CFTC’s decision to obtain FCM records on different dates, and shifts in the

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 69 of 86
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exchange rate means that the CFTC and NFA auditors were unable to come up with 100%

ironclad calculations down to the penny. Nevertheless, the millions of dollars worth of

discrepancies in Lake Shore Limited’s claimed and actual profits for the Lake Shore Alternative

Financial Asset Funds is compelling.

iv. Transfers Between Funds

The fact sheet for Lake Shore Alternative Financial Asset Fund IV states that the

manager’s investment objective “is to maximize returns whilst preserving capital” by investing

equally in Lake Shore Fund I, II, and III. (Plt. Ex. 19 at 221 04 0157). In other words, money

from Lake Shore Alternative Financial Asset Fund IV should flow towards Lake Shore

Alternative Financial Asset Funds I, II, and III.

This is inconsistent with Ms. Johnson’s testimony about seven transfers totaling

$2,107,532.96 that were made between Lake Shore Limited’s various Sentinel accounts in June

of 2006. Based on her review of the documents, Ms. Johnson concluded that monies were being

transferred from Lake Shore Alternative Financial Asset I, II, and III to IV (obviously, this is the

opposite direction from that represented in Lake Shore Limited’s fact sheet for Fund IV, which

said that Fund IV flowed to Funds I, II, and III). She opined that this suggested that Lake Shore

did not treat Fund IV–Trading as independent from the other accounts. She then stated that it

was possible that the transfers were legitimate, but that Lake Shore Limited had offered no

evidence explaining why the transfers were made. 

Mr. Brodersen testified about these same transactions and stated that they appeared to be

irregular since an FCM cannot commingle the funds of one commodity pool with another. He

conceded that it would be possible for the transfers to be proper because they could be fund to

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 70 of 86
 The same cannot be said for Lake Shore Limited’s principals, who were authorized to 14

transfer monies from the accounts. For example, the principals and employees of Lake Shore

Limited were authorized to transfer funds in all of Lake Shore’s accounts at Sentinel from at

least June 28, 2001. 

-71-

fund transfers, represent a feeder fund, or flow from an investor’s decision to change strategy,

but stated that this type of activity would warrant further investigation. Again, Lake Shore

Limited presented no evidence as to why the transfers occurred. These transfers are thus notable

in that Ms. Spear believed they were questionable and Mr. Brodersen opined that they warranted

an audit.

v. Access to Funds 

Lake Shore Limited contends that it could not have engaged in fraud because it does not

handle customer assets, hold fund accounts in its name, or have the ability to withdraw money

from funds. It legally cannot do any of these things, because clients invest in a specific fund

pursuant to that fund’s offering documents, and these monies are deposited with a FCM in

accounts which are owned by that fund and are in that fund’s name. Moreover, the CFTC has 14

not asserted that Lake Shore Limited committed fraud by improperly accessing monies in any

funds’ accounts, largely because, for the reasons above, it cannot do so directly. Thus, Lake

Shore Limited’s arguments about its inability to directly access any of the Lake Shore Funds are

irrelevant. 

vi. Disclosures Regarding Interest on the Sentinel Accounts

Lake Shore Limited is the reorganized version of Lake Shore Inc., which represented that

“Lake Shore operates on a full disclosure basis.” (Plt. Ex. 8, p.5, 299 02 0011). Lake Shore

Limited did not disclose that between 2006 and 2007, it transferred approximately $1.4M

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 71 of 86
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($976,207 + $445,683) of the interest from the Sentinel accounts to Anglo to use for Lake Shore

Limited’s payroll. It also did not disclose that pool funds were being used to pay its overhead

and expenses.

The offering memorandum for Fund IV disclosed that interest would not be paid to the

investors on funds held with the custodian. Mr. Brodersen testified that telling investors that they

would not receive interest on funds held with the custodian does not absolve Lake Shore Limited

from an obligation to disclose any conflicts of interest, such as the fact that a pool is paying

interest earned on customer funds to the CPO for its operating, personnel, and overhead

expenses. It is possible to disclose the type of financial arrangements made by Lake Shore

Limited, which would make them permissible. However, Lake Shore Limited did not do so. 

This is problematic because according to Mr. Brodersen, this information must be disclosed. 

Indeed, Mr. Brodersen testified that if he learned during an audit that a pool operator was using a

substantial amount of customer funds to pay for undisclosed expenses, the NFA would take

emergency action against that pool operator.

Turning to the interest transferred to Hanford, Sentinel records show that between

November of 2002 and June 2007, about $9,936,505.74 in earned interest was wired out from

Lake Shore accounts at Sentinel to Hanford for the benefit of Philip Baker. In addition, on June

4, 2007, Hanford sent $710,993.50 to Lefkada, Athens, Greece, for the purchase of real estate. 

No evidence shows that investors were ever told that interest on Fund accounts would be given to

a company run by a Lake Shore Limited principal to be used for the purchase of real estate.

Again, payment of interest to an entity affiliated with the Lake Shore’s principal is proper

if it is authorized and disclosed, but Lake Shore Group and Lake Shore Limited’s disclosure

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 72 of 86
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documents do not state that the interest would be paid to Hanford. In response to the CFTC’s

arguments about disclosure, Lake Shore Limited contends that it disclosed that Lake Shore

Alternative Financial Asset Funds I, II, and III would not transfer any interest on cash balances

held by the Bank of New York to Lake Shore Alternative Financial Asset Fund IV Limited. The

court finds that this disclosure is ineffective because it accepts Mr. Brodersen’s testimony that

this disclosure cannot be fairly understood as a statement that income earned on the funds on

deposit at Sentinel would be paid to an undisclosed entity controlled by Baker.

Overall, Lake Shore Limited’s failure to make the required disclosures is troubling. 

Perhaps, as Lake Shore Limited suggests, investors would have acted the same if Lake Shore

Limited had made the required disclosures. And perhaps, as Lake Shore Limited also suggests,

these transfers were proper because Mr. Baker was acting in his capacity as a principal of

Hanford and Anglo, as opposed to a more nefarious reason, when he arranged for the transfers. 

These suggestions, however, are just that. The record shows that the transfers were a conflict of

interest that had to be disclosed, and they were not disclosed. 

vii. The U.S. Investor

Mr. Stoltz, who appears to be the sole U.S. investor, deposited $1M in May of 2007 with

Fund IV–U.S., which is a feeder fund for Lake Shore Alternative Financial Asset Fund IV. 

As of June 11, 2007, Lake Shore records showed that Mr. Stoltz had a balance of $1,015,324.29. 

The court infers from Lake Shore Limited’s promotional materials that it regularly notified

investors regarding their accounts. This would mean that Mr. Stoltz received information about

his account’s status. 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 73 of 86
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Lake Shore Limited’s June 11, 2007 figure for Mr. Stoltz would show any profit he made

in May and June. Mr. Brodersen reviewed the Lehman, Fimat, and Sentinel records for Fund IV,

which are dated June 30, 2007, May 31, 2007, and July 26, 2007, respectively. In May of 2007,

Fund IV had a negative performance. Due to the date of the FCM records, Mr. Brodersen was

unable to verify the performance of Lake Shore Alternative Financial Asset Fund IV in its

entirety from June 1 through June 11, 2007. Based on the partial records (e.g., the fact that

Fimat’s records are dated May 31, 2007), it is theoretically possible, although not supported by

any evidence in the record, that the Lake Shore Limited’s claimed June 11, 2007 balance for Mr.

Stoltz was correct. For this to be so, Fimat’s records for June 1 – 11, when added to the existing

Man and Lehman records for this time period, would have to show that the June 11 figure was

accurate. 

The timing of the Fimat records thus appears to be problematic because without June

records from Fimat, there is no way to verify Lake Shore Limited’s numbers. Of course,

however, this is not true: Lake Shore Limited has records that would fill the gap. It has taken the

position that it was only obligated to turn over records for Mr. Stoltz and Fund IV–U.S., and it

allegedly turned over these records. Yet, Lake Shore Limited did not point to any evidence

indicating that its hypothetical supporting the accuracy of Mr. Stoltz’s June 11 balance is

accurate. This is telling because even under Lake Shore Limited’s own theory that it was only

obligated to produce records for Mr. Stoltz and Lake Shore Fund IV/Lake Shore Alternative

Financial Asset Fund IV (which the court believes is unjustifiably limited), it should have been

able to support the June 11 balance. 

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This leaves the court with the fact that once again, Lake Shore Limited’s position

regarding the accuracy of the June 11 balance is unsupported by any evidence. In contrast, Mr.

Brodersen believed that the June 11 figure was questionable due to Fund IV’s May performance

and the June records from two of the three FCMs. 

viii. Churning

The alleged churning in the two Man accounts took place in 2004, well before Lake Shore

Limited’s formation in 2006. The court has found that Lake Shore Limited is both the mere

continuation of Lake Shore Inc. and a participant in the Lake Shore common enterprise, which

was responsible for the unusual commission to equity ratio in the two Man accounts. 

Nevertheless, this activity is sufficiently far off in time that it is not probative as to whether Lake

Shore Limited is currently engaging in churning. Moreover, the record does not contain any

other evidence indicating that this is an ongoing practice. This is significant as the CFTC

obtained records from all of Lake Shore’s FCMs, who would be in a position to detect any other

instances of alleged churning. Thus, the suspicious commission to equity ratio in 2004, while

less than ideal, is not particularly helpful to the court’s consideration of Lake Shore Limited’s

current situation.

ix. Lake Shore Limited’s Response to the CFTC’s Evidence

The court next considers Lake Shore Limited’s position on a more global level. Lake

Shore Limited contends that the court cannot infer that Lake Shore Limited’s failure to produce

its records means that those records contain information supporting the CFTC’s position. The

cases it cites in support deal with the inferences to be drawn from the destruction of documents

and the presumptions attaching to failure to comply with document retention regulations. See

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 75 of 86
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Park v. City of Chicago, 297 F.3d 606, 615 (7th Cir. 2002); Rummery v. Ill. Bell Tel. Co., 250

F.3d 553, 558-59 (7th Cir. 2001). The court sincerely hopes that neither of these situations has

occurred in this case.

The effect of Lake Shore Limited’s failure to produce its documents is more basic: 

without these documents, Lake Shore Limited was largely reduced to presenting its side of the

story by cross-examining the CFTC’s witnesses, which is what happened during the preliminary

injunction hearing. For example, Lake Shore Limited asked Mr. Brodersen if the irregularities in

Lake Shore Limited’s stated profitability could be explained by fund of fund transfers but did not

present any evidence supporting this theory. This was repeated throughout the hearing as time

after time, Lake Shore Limited asked witnesses if an alternative interpretation was possible, but

presented absolutely no evidence in support of its proposed interpretation. 

Lake Shore Limited has also taken the position that its promotional materials are

irrelevant because the CFTC did not present a witness who said that Lake Shore Limited actually

used these materials. Given that Mr. Sainsbury (a former Lake Shore Limited salesperson) made

statements about the importance to customers about certain portions of the Pitch, Mr. Eveleigh

produced the Pitch, organizational charts, and various offering memoranda of the Lake Shore

funds to the CFTC, and other Lake Shore Limited documents were produced to the CFTC by

third parties such as the Bank of Montreal–Ireland, the court finds this argument unpersuasive. 

In any event, Lake Shore Limited has pointed to no evidence supporting its contention that it

never used any of its documents when it was acting as a CTA and CPO for the funds.

Positing theories unsupported by any evidence is not enough to controvert the CFTC’s

positions where those positions are amply supported by credible evidence. Murphy v. ITT

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 76 of 86
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Educational Services, Inc., 176 F.3d 934, 938 (7th Cir. 1999) (“speculations do not provide an

evidentiary foundation to support any of [the plaintiff’s] claims or her attempt to draw any

favorable, reasonable inferences from that evidence”); Clearwater Transport, Inc. v. N.L.R.B.,

133 F.3d 1004, 1012 (7th Cir. 1998) (speculation, conjecture, and hypotheticals are not enough to

support a party’s position regarding key facts); Commodity Futures Trading Com’n v. IBS, Inc.,

113 F.Supp.2d 830, 853 (W.D.N.C. 2000) (rejecting testimony that withdrawals represented

payment for services where no records or tax forms were produced to support this assertion). 

This is especially true when the vast majority of the financial evidence came in through CFTC

and NFA auditors, who were extremely believable as well as disinterested witnesses, and there is

no evidence supporting an inference that the Lake Shore Limited documents in the record are

somehow untrustworthy.

Thus, Lake Shore Limited is attempting to swim upstream when it responds to credible

and compelling evidence from the CFTC with speculative theories. This is especially true given

that the court has devoted a very significant amount of time to mulling over the evidence in this

case, and is simply not persuaded that Lake Shore Limited’s theories are well-founded in light of

the record as a whole. In sum, the fact that Lake Shore Limited’s theories do not provide any

concrete basis for discrediting the evidence in the record, coupled with the nature of the CFTC’s

evidence and the gravity and extent of the issues shown by the record, supports the court’s

conclusion that the CFTC has demonstrated that it has a likelihood of success on the merits of its

claims against Lake Shore Limited.

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 77 of 86
 The court excluded declarations from intermediaries, dealers, and clients voicing their 15

desire to see the asset freeze lifted because those documents reflected the declarants’ belief that

the declarant and/or his/her organization were being harmed by the now-vacated statutory

restraining order and that Lake Shore Limited’s document production issues were not enough to

warrant an asset freeze. Lake Shore Limited has produced no evidence indicating that any of its

intermediaries, dealers, or clients are aware of the CFTC’s allegations of fraud and still wish to

allow Lake Shore Limited to continue to act as the CTA and CPO for the Lake Shore Alternative

Financial Asset Funds.

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F. Harm to Investors and Lake Shore Limited

The court next considers the harm that would be caused by granting the requested relief. 

Based on the evidence before the court, Lake Shore Limited was the Lake Shore Alternative

Financial Asset Funds’ CTA and CPO and made material misrepresentations and omissions

about (among other things) the performance of its trading system and the profitability of the Lake

Shore Alternative Financial Asset Funds. The court believes that based on the present record,

there is a substantial risk of harm to investors’ financial interests if Lake Shore Limited is

allowed to continue its present course of action. 

The court is also not persuaded that the lack of evidence about investors’ satisfaction or

dissatisfaction with Lake Shore Limited is particularly meaningful. Investors are certainly free to

invest as they wish, with the entity of their choice. No evidence, however, shows that the

investors are aware of the CFTC’s fraud allegations or the evidence presented during the

preliminary injunction hearing. Moreover, even if Lake Shore Limited’s investors are an 15

exceptionally risk-seeking group who would not be concerned if they knew about the evidence

adduced during the preliminary injunction hearing (a proposition that the court simply cannot

accept), Lake Shore Limited must still comply with the Act’s record keeping and anti-fraud

provisions. 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 78 of 86
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Ultimately, the court is charged with determining if the CFTC has made a prima facie

showing that Lake Shore Limited violated the Act and if there is a reasonable likelihood of future

violations. See Commodity Futures Trading Com’n v. Hunt, 591 F.2d at 1220. Past misconduct

is highly suggestive of the likelihood of future misconduct. Id. Here, the serious and ongoing

nature of Lake Shore Limited’s past actions, the totality of the circumstances, and Lake Shore

Limited and its principals’ positions with respect to the Lake Shore Alternative Financial Asset

Funds are all exceedingly troubling. Any harm to Lake Shore Limited incurred as a result of this

order is due to its own conduct and does not outweigh the need to protect the investors. 

Accordingly, for all of the reasons discussed above, the court finds that the CFTC has met its

burden of showing a likelihood of success on the merits and that the balance of harms weighs in

favor of entering a preliminary injunction.

F. Scope of Appropriate Relief Based on the Present Record

1. Asset Freeze

Lake Shore Limited contends that an asset freeze is improper based on its belief, which

the court has rejected, that the CFTC failed to meet its burden of showing a prima facie case of

fraud. Injunctive relief may include an asset freeze if necessary to protect investors. Commodity

Futures Trading Com’n v. Lake Shore Asset Management Ltd., 2007 WL 2206862, at *3;

Commodity Futures Trading Com’n ex rel. Kelley v. Skorupskas, 605 F.Supp. 923, 943 (D.C.

Mich. 1985) (asset freeze was necessary “to protect the investors from further fraud, to deter such

conduct in the future, and to prevent [the defendant] from benefitting any further from her

deceit”). An asset freeze may also be warranted if it is necessary to ensure the availability of

permanent relief later. Commodity Futures Trading Com'n v. Kimberlynn Creek Ranch, Inc., 276

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 79 of 86
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F.3d 187, 193 (4th Cir. 2002); Levi Strauss & Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982, 987

(11th Cir. 1995) (“A request for equitable relief invokes the district court’s inherent equitable

powers to order preliminary relief, including an asset freeze, in order to assure the availability of

permanent relief”); Commodity Futures Trading Com’n v. American Metals Exchange Corp.,

991 F.2d 71, 77 (3d Cir. 1993) (an asset freeze is “designed to preserve the status quo by

preventing the dissipation and diversion of assets”). The court finds that due to the substantial

risk of investor harm shown by the present record, an asset freeze is necessary not only to protect

investors but also to prevent the potential dissipation of monies in the accounts.

It is, however, important to note that any asset freeze entered by this court overlaps with

the existing asset freeze covering all NFA members with Lake Shore Limited accounts that was

issued by the NFA. The NFA asset freeze is the subject of a pending administrative appeal by

Lake Shore Limited. See Lake Shore Asset Management, Ltd. v. National Futures Association,

CFTC Docket No. CRAA 07-02. The parties are directed to promptly advise the court of any

rulings in that administrative proceeding. Nevertheless, because the court finds that the CFTC

has met its burden of proof, an asset freeze to protect the investors is warranted, even if that

freeze is duplicative of the NFA asset freeze. 

The court next considers the reach of the asset freeze. The Act allows for the entry of a

restraining order against “any person” necessary to prevent the disposal of assets obtained in

violation of the Act. 7 U.S.C. § 13a-1. The CFTC’s brief focuses on freezing the assets at the

FCMs, but its proposed order has a far broader reach because the CFTC seeks an order requiring

the foreign FCMs to transfer Lake Shore assets to their affiliates. The CFTC has presented no

authority in support of this request so it is denied without prejudice.

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 80 of 86
 This means that the CFTC’s request for an accounting, which is directed at all records 16

of Lake Shore Limited and the Lake Shore enterprise, is overly broad as it reaches records other

than those relating to the Lake Shore Alternative Financial Asset Funds.

-81-

The court also takes judicial notice of Sentinel’s recent legal troubles. See SEC v.

Sentinel Management Group, Inc., 07 C 4684 (N.D. Ill.); Farr Financial, Inc. v. Sentinel

Management Group, Inc., 07 C 4614 (N.D. Ill.); In re: Sentinel Management Group, Inc., 07-

14987 (N.D. Ill. Bankr.). Currently, an asset freeze imposed by the NFA pursuant to a Member

Responsibility Action is in place and is directed at the four FCMs in this case (Sentinel, Man,

Lehman, and Fimat). If the NFA was to lift its separate asset freeze, it may best serve the

interests of the investors to move the funds at Sentinel to another FCM if possible, where they

can remain frozen pending resolution of this case. Certainly, to the extent that monies at Sentinel

become available, it is not in the investors’ best interests to place them at the end of the line of

creditors. The court will leave it to Lake Shore Limited to file a motion addressing this

contingency if warranted. 

2. Scope of Document Production

The CFTC seeks an order requiring Lake Shore Limited to allow the CFTC to access all

records of foreign financial institutions that hold Lake Shore assets. This request is overly broad

because at this point, the CFTC has only established that Lake Shore Limited (as well as Lake

Shore Inc. and the other entities in the Lake Shore common enterprise) engaged in activities in

the capacity of a CPO and/or CTA that were material to the successful completion of the alleged

scheme vis-a-vis the four FCMs. Lake Shore clearly must have additional documents relating to

the SMAs. At this time, however, the court is not convinced that requiring Lake Shore Limited

to produce these documents to the CFTC is appropriate. As discussed above, the court would 16

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 81 of 86
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like to consider the parties’ views as to the appropriate way to proceed (special master, attorneys’

eyes only review, or some other means which allows review of Lake Shore Limited’s reasoning

in deciding certain documents are not subject to production). Thus, the parties shall meet and

confer and file a joint memorandum by September 4, 2007, regarding this issue. If this is not

possible, they may file separate memoranda.

The CFTC also has asked the court to order Lake Shore Limited to sign a records release

that appears to cover foreign financial institutions. As discussed at length above, Lake Shore

Limited must produce certain of its own documents as well as the corresponding documents of

its predecessors because the CFTC has established that Lake Shore Limited acted as a CTA and

CPO in connection with the Lake Shore Alternative Financial Asset Funds and Lake Shore

Limited is the mere continuation of Lake Shore Inc., a participant in the Lake Shore common

enterprise. This is not the same thing as requiring the Lake Shore Funds or the Lake Shore

Alternative Financial Asset Funds to produce their records. Because the CFTC has not

established the propriety of requiring funds to produce their records, its request to obtain these

documents is denied without prejudice. 

III. Conclusion

For the reasons set forth above, the CFTC’s motion for a preliminary injunction is [#65]

is granted in part and denied in part. The parties shall meet and confer and file a joint

memorandum by September 4, 2007, regarding the appropriate way to handle documents that

Lake Shore Limited believes are outside the scope of this order. If this is not possible, they may

file separate memoranda. Lake Shore Limited is also directed to promptly advise the court of any

substantive rulings in the NFA administrative proceeding.

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 82 of 86
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In addition, IT IS HEREBY ORDERED THAT:

1. Defendant Lake Shore Limited, individually and as part of the Lake Shore

common enterprise, is restrained, enjoined and prohibited, until further order of the court, from

directly or indirectly:

A. Cheating, defrauding or willfully deceiving or attempting to cheat, defraud

or willfully deceive other persons in or in connection with an offer to enter

into, the entry into, the confirmation of the execution of, or the

maintenance of, any commodity futures transactions, in violation of

Sections 4b(a)(2)(I) and (iii) of the Act, 7 U.S.C. § 6b(a)(2)(I) and (iii);

B. Willfully making or causing to be made to any other person any false

report or statement thereof or causing to be made for any person any false

record thereof, in or in connection with an offer to enter into, the entry

into, the confirmation of the execution of, or the maintenance of, any

commodity futures transactions, in violation of Section 4b(a)(2)(ii) of the

Act, 7 U.S.C. § 6b(a)(2)(ii);

C. While acting in the capacity of a commodity pool operator (“CPO”) or

commodity trading advisor (“CTA”) employing any device, scheme or

artifice to defraud any client or participant or prospective client or

participant or engaging in any transaction, practice, or course of business

which operates as a fraud or deceit upon any client or participant or

prospective client or participant by use of the mails or any means or

instrumentality of interstate commerce, in violation of Section 4o(1) of the

Act, 7 U.S.C. § 6o(1).

D. In its capacity as a registered CTA or CPO, failing to provide upon request

of the Commission the name and address of each client, subscriber, or

participant, or to submit samples or copies of all reports, letters, circulars,

memoranda, publications, writings, or other literature distributed to

clients, subscribers or participants or prospective clients, subscribers or

participants or other records required by Commission Regulation, in

violation of Section 4n of the Act, 7 U.S.C. § 6n and Regulations 1.31,

4.23 and 4.33, 17 C.F.R. §§ 1.31, 4.23, 4.33 (2007). 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 83 of 86
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2. Defendant Lake Shore Limited, individually and as part of the Lake Shore

common enterprise, is further restrained, enjoined and prohibited, until further order of the court,

from directly or indirectly:

A. Engaging in, controlling, or directing the trading of any commodity futures

and options accounts, on their own behalf or on behalf of any other person

or entity, whether by power of attorney or otherwise;

B. Soliciting customers to trade commodity futures and options;

C. Trading on or subject to the rules of any registered entity as that term is

defined in § 1a(29) of the Act, 7 U.S.C. § 1a(29);

D. Placing orders, giving advice or price quotations or other information in

connection with the purchase or sale of commodity futures and options

contracts for themselves and others; and

E. Otherwise engaging in any business activities related to commodity futures

and options trading.

3. Defendant Lake Shore Limited, individually and as part of the Lake Shore

common enterprise, and the Lake Shore common enterprise are further restrained, enjoined and

prohibited, until further order of the court, from directly or indirectly:

A. Destroying, mutilating, concealing, altering or disposing of any books and

records, documents, correspondence, brochures, manuals, electronically

stored data, tape records or other property of Lake Shore Limited or the

Lake Shore common enterprise, wherever located, including all such

records concerning the Lake Shore common enterprise’s business

operations;

B. Refusing to permit authorized representatives of the CFTC to inspect and

copy, when and as requested by those representatives, any books and

records, documents, correspondence, brochures, manuals, electronically

stored data, tape records or other property of Lake Shore Limited, the Lake

Shore common enterprise, and their agents, wherever located and whether

they are in the hands of any Lake Shore entity, to the extent that those

records related to activities of any Lake Shore entity taken as a CTA or

CPO or that relate to trading that occurred on U.S. exchanges; and

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 84 of 86
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C. Withdrawing, transferring, removing, dissipating, concealing or disposing

of, in any manner, any assets related to Lake Shore Alternative Financial

Asset Funds I, II, III, and IV, including but not limited to, all funds, money

or securities held in safes, safety deposit boxes and all funds on deposit in

any financial institution, bank or savings and loan accounts held by, under

the control of, or in the name of Lake Shore Alternative Financial Asset

Funds I, II, III, and IV. 

4. The injunctive provisions of this order shall be binding on Lake Shore Limited

and the Lake Shore common enterprise and any person insofar as he or she is acting in the

capacity of officer, agent, servant, employee or attorney of Lake Shore Limited or the Lake Shore

common enterprise and any person who receives actual notice of this order by personal service,

facsimile or otherwise insofar as he or she is acting in active concert or participation with Lake

Shore Limited or the Lake Shore common enterprise.

5. This Order shall remain in effect until further order of the court.

DATE: August 28, 2007 ___________________________________

Blanche M. Manning

United States District Judge

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 85 of 86
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Court’s Summary Chart

Exhibit 1 to CFTC v. Lake Shore Limited, 07 3598, (N.D. Ill. Aug 28, 2007)

This summary chart is drawn directly from the exhibits and depicts the organization of

the Funds at the FCM level. Specifically, it is a combination of and drawn from Plaintiff. Ex. 15

(Mr. Brodersen’s declaration and the accompanying exhibits), Plaintiff. Ex 4 at p.3 (the Pitch). 

Finally, in the interests of simplicity, the court omitted the details for the many Yen funds. 

Case 1:07-cv-03598 Document 118 Filed 08/28/2007 Page 86 of 86