IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

U.S. COMMODITY FUTURES 

TRADING COMMISSION, 

Plaintiff 

VS. 

) 

) 

) 

) 

) 

) 

LAKE SHORE ASSET MANAGEMENT ) 

LIMITED; ) 

07C 

RECEIVED 

JUN 26 2007 

MICHAEL 

CLERK W. DOBBINS 

' U.S. DISTRICT COURT 

3598 

Defendant. 

) 

) 

MAGISTRAT E JUDGE MASO:i 

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF AND 

FOR CIVIL MONETARY PENAL TIES UNDER THE COMMODITY 

EXCHANGE ACT 

I. SUMMARY 

1. Since June 21, 2007 and continuing through the present ("relevant time"), 

the Defendant, Lake Shore Asset Management Limited ("LAM"), which was acting as a 

commodity pool operator ("CPO") and a commodity trading advisor ("CT A") and was 

registered in those capacities with plaintiff Commodity Futures Trading Commission 

("Commission" or "CFTC"), has refused to make its books and records available for 

inspection and has been unable or unwilling to provide information about its pool 

participants and trading performance. 

2. LAM thus has engaged, is engaging or is about to engage in acts and 

practices in violation of Section 4n Commodity Exchange Act, as amended (the "Act"), 7 ~ 

U.S.C. § 6n (2002), and Commission Regulations ("Regulations") 1.31, 4.23, and 4.33, 

17 C.F.R. §§ 1.31, 4.23, and 4.33 (2007). 
3. Unless restrained and enjoined by this Court, the Defendant is likely to 

continue to engage in the acts and practices alleged in the Complaint and in similar acts 

and practices, as more fully described below. 

4. Accordingly, pursuant to Section 6c(a) ofthe Act, 7 U.S.C. § 13a-1 

(2002), the Commission brings this action to enjoin Defendant's unlawful acts and 

practices, and compel Defendant's compliance with the provisions of the Act and 

Regulations thereunder. 

II. JURISDICTION AND VENUE 

5. This Court has jurisdiction over this action pursuant to Section 6c of the 

Act, 7 U.S.C. § 13a-1 (2002), which provides that whenever it shall appear to the CFTC 

that any person has engaged, is engaging, or is about to engage in any act or practice 

constituting a violation of any provision of the Act or ariy rule, regulation, or order 

promulgated thereunder, the CFTC may bring an action in the proper District Court of the 

United States against such person to enjoin such practice, or to enforce compliance with· 

the Act, or any rule, regulation or order thereunder. 

6. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 

7 U.S.C. § 13a-l(e) (2002), because the Defendant has an office in this District and the 

acts and practices in violation of the Act have occurred within this District. 

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III. THE PARTIES 

7. Plaintiff Commodity Futures Trading Commission is an independent 

federal regulatory agency that is charged with administering and enforcing the Act, 

7 U.S.C. §§ 1 et seq. (2002), and the Regulations promulgated thereunder, 17 C.F.R. §§ 1 

et seq. (2007). 

8. Defendant Lake Shore Asset Management Limited is located at 875 N. 

Michigan Ave., Suite 1562, Chicago, Illinois 60611-7 449. In various documents and on 

its website it purports to be a Bermuda corporation domiciled in the British Virgin 

Islands. LAM has been registered with the Commission as a CPO and a CTA since 

January 2007. LAM is also a member ofthe National Futures Association (''NFA"). 

A. Statutory And Regulatory Background 

9. Section la{5) of the Act, 7 U.S.C. § la(5) (2002), defines a CPO as any 

person engaged in the 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. 

10. Section la{6) ofthe Act, 7 U.S.C. § 1a(6) (2002), defines aCTA as any 

person who 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 

3 
execution facility; (II) any commodity option authorized under section 4c; or (III) any 

leverage transaction authorized under section 19; or for compensation or profit, and as 

part of a regular business, issues or promulgates analysis or reports concerning any of the 

activities referred to above. 

11. Section 4n ofthe Act, 7 U.S.C. § 6n (2002) requires CTAs and CPOs to 

maintain certain books and records in such form and manner as may be prescribed by the 

Commission, and, upon request by the Commission, shall make available for inspection 

such books and records. 

12. Regulation 1.31, 17 C.F.R. § 1.3l(a)(l)(2007), provides, in relevant part, 

that all books and records required to be kept by the Act and Regulations shall be readily 

accessible and open to inspection by any representative ofthe Commission or the United 

States Department of Justice. 

13. Regulation 4.23, 17 C.F.R § 4.23 (2007), provides, in relevant part, that 

all registered CPOs must make, keep and produce upon Commission request certain 

books and records including, but not limited to, literature distributed to existing or 

prospective participants and itemized records of commodity interest transactions. 

14. Regulation 4.33, 17 C.F.R § 4.33 (2007), provides, in relevant part, that 

all registered CTAs must make, keep and produce upon Commission request certain 

books and records including, but not limited to, the name and address of each client and 

subscriber, literature distributed to existing or prospective clients, and itemized records of 

each commodity interest transaction ofthe CTA. 

15: The NF A is a not-for-profit membership corporation and is a selfregulatory organization that is registered with the Commission as a futures association 

4 
under Section 17 of the Act. The NF A conducts audits and investigations ofNF A 

member firms, including registered CTAs and CPOs, to monitor for compliance with 

NF A rules, some of which incorporate by reference Commission Regulations. 

IV. FACTS 

16. Between at least January 17, 2007 and up to the present, LAM has been 

registered with the Commission; as a CPO and aCTA, pursuant to Section 4m of the Act, 

7 U.S.C. § 6m (2002). LAM is also a member ofthe NFA. 

17. Among other things, Defendant operates and advises collective investment 

vehicles that trade in, among other things, commodity futures contracts traded on United 

States futures exchanges. LAM has at least ten United States customers. 

18. Between at leastJune 11, 2007 and up to the present, the NF A conducted a 

review of LAM's website at www.lakeshorefunds.com. The website, among other 

things: promotes pools called Lake Shore Funds I, II, III, and IV; touts a highly profitable 

13-year performance record; represents that LAM is regulated by the CFTC and NF A; 

and includes a link to NFA's website. 

19. On June 14,2007, NFA also conducted a review ofLAM's operations 

and, as part of that review, asked LAM's principal, Laurence M. Rosenberg 

("Rosenberg"), to produce books and records by noon June 19,2007. 

20. ·On June 14,2007, Rosenberg represented that: LAM operates several 

commodity pools; LAM had no United States participants; LAM's "LS Fund IV U.S." 

presently has $70 million invested in it; in addition to the pools, LAM managed 

. approximately 250 accounts; and the total assets ofthe pools and managed accounts were 

approximately $1 billion. 

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21. On June 14,2007, LAM confirmed to the NFA that LAM operated several 

commodity pools, that none of the pools have participants who are United States citizens 

or who are domiciled in the United States, and that LAM's recently formed "LS Fund IV 

U.S." is intended for United States investors. Rosenberg also represented that the pools 

have trading accounts with Man Financial London, Lehman Brothers London and Fimat 

London. 

22. Later that same day, Rosenberg changed the earlier representation that 

none of the commodity pools had any United States investors and represented that "LS 

Fund IV U.S." had one United States investor who had invested $1 million. 

23. When the NFA asked Rosenberg why LAM's NFA registration records 

indicate that LAM's main office is in Bermuda, Rosenberg told them that no business is 

conducted in Bermuda. While there is an. office in Bermuda with an attorney acting as 

ru;t agent, all calls to Bermuda are forwarded to LAM's office in Toronto, Canada. 

Rosenberg also said that the Toronto office is where all trading is done and all books and 

records are maintained. 

24. On June 15, 2007, Rosenberg provided the NF A with access to LAM's 

protected web pages and the NF A learned that assets for all commodity pools and 

managed accounts totaled $466,710,761, dramatically less than Rosenberg's estimate that 

LAM had approximately $1 billion under management. It also appeared that LAM had at 

least 10 United States customers. 

25. On June 19,2007, Rosenberg revoked NFA's access to LAM's protected 

website and told NF A that upon the advice of counsel, located in Geneva, Switzerland, 

LAM would not provide any additional informationbecause of concerns related to "bank 

6 
secrecy" laws. NF A reminded Rosenberg that LAM had agreed to make its books and 

records available to NF A within 72 hours and had certified in its registration application 

that it was not subject to any blocking privacy or secrecy laws that created an obstacle to 

. full record production. Later that same day, Rosenberg denied having any ownership 

interest in LAM and claimed he could not authorize the release of any information. 

26. In part because LAM refused to provide the documents to NF A, on June . 

21, 2007, the Commission issued a document request to LAM, pursuant to Section 4n of 

the Act, requesting, among other things, that LAM produce books and records including 

records that would reflect the actual performance of the commodity pools, and produce a 

list with the name and address of each client, or participant, and submit samples or copies 

of all reports, memorandums, publications or other literature or advice distributed to 

· clients or participants. 

27. On June 21, 2007, Rosenberg told Commission staff that there were no 

books and records in the Chicago office and that all books and records were located in 

Toronto and were not available for inspection. 

28. Commission staff later learned that the address for the Toronto office 

provided by LAM in registration materials was a "mail drop." Commission staff also 

learned that the individual whose name appeared on registration materials as LAM's 

compliance officer claimed to be an "IT" consultant under contract with LAM. 

29. LAM failed to produce the requested records in violation ofthe Act and 

Regulations. 

30. Accordingly, the Commission brings this action pursuant to Section 6c of 

the Act, 7 U.S.C. § 13a-1 (2002), to enjoin Defendant's unlawful acts and practices and 

7 
to compel their compliance with the Act and Regulations. In addition, the CFTC seeks 

civil monetary penalties and such other equitable relief as this Court may deem necessary 

or appropriate. 

V. VIOLATIONS OF THE COMMODITY EXCHANGE ACT AND 

COMMISSION'S REGULATIONS 

VIOLATIONS OF SECTIONS 4n OF THE ACT AND REGULATIONS 1.31, 4.23, 

AND 4.33: BOOKS AND RECORDS 

31. The allegations set forth in paragraphs 1 through 31 are re-alleged and 

incorporated by reference. 

32. Section 4n ofthe Act and Regulation 1.31 require that every CPO and 

CTA maintain books and records in such form and manner as may be prescribed by the 

Commission. All such books and records shall be kept (or a period of five years and shall 

be readily accessible during the first two years. All such books and records shall be open 

to inspection by any representative of the Commission or the Department of Justice. 

33. Regulation 4.23 provides, in relevant p:;trt, that all registered CPOs must 

make, keep and produce upon Commission request certain books and records including, 

but not limited to, literature distributed to existing or prospective participants and 

itemized records of commodity interest transactions. Regulation 4.33 provides, in 

relevant part, that all registered CTAs must make, keep and produce upon Commission 

request certain books and records including, but not limited to, the name and address of 

each client and subscriber, literature distributed to existing or prospective clients, and 

itemized records of each commodity interest transaction of the CTA. 

34. Beginning on June 21, 2007 and continuing through the present, LAM 

violated Section 4n ofthe Act, 7 U.S.C. §§ 6n (2002), and Regulations 1.31, 4.23, and 

4.33, 17 C.F.R. §§ 1.31, 4.23, and 4.33 (2007) by: refusing to, upon request of the 

8 
Commission, make available for inspection its books and records, including records that 

would show the actual performance ofthe commodity pools, and by refusing to 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 to 'the Commission upon its request. 

35. Each day LAM failed to comply with the Commission's request to make 

its books and records available for inspection is alleged as a separate and distinct 

violation of Section 4n of the Act, 7 U.S.C. § 6n"(2002), and Regulations 1.31, 4.23, and 

4.33, 17 C.F.R §§ 1.31, 4.23, and 4.33 (2007). 

VI. RELIEF REQUESTEDWHEREFORE, Plaintiffrespectfully-requests,that this Court,_ as authorized by 

Section 6c ofthe Act, 7 U.S.C. § 12a-l, and pursuant to its own equitable powers: 

(1) Find LAM liable for violating Section 4n of the Act, 7 U.S.C. § 6n (2002); 

and Regulations 1.31, 4.23, and 4.33, 17 C.P.R. §§ 1.31, 4.23, and 4.33 (2007). 

(2) Enter an Order pursuant to Section 6c(a) of the Act restraining Defendant, 

its agents, servants, employees, successors, assigns, attorneys ofthe Defendant and all 

persons insofar as they are acting in active concert or participation with them who receive 

actual notice of this Order by personal service or otherwise, from directly or indirectly: 

a) Dissipating, withdrawing, transferring, removing, concealing or disposing 

of any cash, cashier's checks, funds, assets or other property of, or within the 

custody, control or actual or constructive possession of the Defendant, 

including, but not limited to, all funds, personal property, money or securities 

held in sages, safety deposit boxes, all funds in deposit in any financial 

institution, bank or savings and loan account held by, under the actual or 

constructive control, or in the name of Defendant, funds or property of 

9 
investors, wherever located, whether held in the name of the Defendant, or 

otherwise; 

b) Destroying, mutilating, concealing, altering or disposing of, in any 

manner, any of the books and records, documents, correspondence, brochures, 

manuals, electronically stored data, tape records or other property ofthe 

Defendant, wherever located, including all such records concerning the 

Defendant's business operations; and 

c) Refusing to make available for inspection by the Commission, when as 

requested, any books, records, documents correspondence, brochures, manual, 

electronically stored data, tape records or other property of Defendant 

wherever located, including, but not limited to, all such records of LAM's 

business operations. 

(3) Enter an Order directing each firm, corporation or other person or entity 

with notice that holds, or that is a depository of, funds, sec.urities, property, or other assets 

of or under the actual or constructive control of LAM, whether held in the name of LAM 

or otherwise,including funds and property ofjnv.estors, is prohibited from transferring, 

. withdrawing, removing, or disposing of a11Y such fiinds, securities, property, or other 

assets until further order of the Court; 

(4) Enter an Order that representatives of the plaintiff Commission be allowed 

to immediately inspect the books, records and other electronically stored data, tape 

recordings, and other documents of the Defendant and its agents, including all such 

records of Defendant's business operations, wherever they are situated and whether they 

are in the possession of the Defendant or others and to copy said documents, data, and 

records either on or off the premises where they may be situated; and, 

(5) Enter an Order enjoining the Defendant from denying the Commission 

access to LAM's records; and, 

( 6) Enter an Order directing the Defendant to pay a civil monetary penalty in 

the amount of not more than the higher of (i) triple the monetary gain to Defendant for 

10 
each violation ofthe Act and Regulations or (ii) $130,000 for violations occurring after 

October 23, 2004; 

(7) Enter an Order requiring Defendant to pay costs and. fees as permitted by 

28 U.S.C. §§ 1920 and 2412(a)(2); and 

(8) Enter an Order providing such other and further remedial ancillary relief 

as the Court may deem appropriate. 

Date: 

11 

Respectfully submitted, 

~-YA-~ ~ < l~ Diane M. RomaniuK: 

Seriior T · Attorney · 

·~:R:P.~ 

AvaM. Gould 

Senior Trial Attorney 

A.R.D.C. No. 06194202 

Attorneys for Plaintiff, 

Commodity Futures Trading 

Commission 

525 West Monroe Street, Suite 1100 

Chicago, Illinois 60661 

(312) 596-0541 (Romaniuk) 

(312) 596-0535 (Gould) 

(312) 596-0520 (Hollinger) 

(312) 596-0700 (office number) 

(312) 596-0714 (facsimile).