' ; 

UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF NORTH CAROLINA 

WESTERN DIVISION 

U.S. COMMODITY FUTURES TRADING 

COMMISSION, 

Plaintiff, 

YELLOWSTONE PARTNERS, INC. and 

DENNIS TODD HAGEMANN, 

Defendants. 

CASE NO. 

FILED 

MAR 0 9 2010 

DENNIS P. IAVARONE CLERK 

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S'lD-CV-dS-ftCOMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY 

PENALTIES, AND OTHER EQUITABLE RELIEF 

Plaintiff U.S. Commodity Futures Trading Commission ("Commission" or "CFTC") 

alleges as follows: 

I. SUMMARY 

1. From at least September 2009 through the present ("relevant period"), Defendants 

Yellowstone Partners, Inc. ("Yellowstone Partners") and Dennis Todd Hagemann ("Hagemann") 

(collectively, "Defendants") fraudulently solicited at least $700,000 from at least nine 

individuals, and attempted to solicit funds from at least one other individual, for the purpose of 

trading managed accounts and/or a pooled investment operated and managed by Defendants and 
in connection with agreements, contracts or transactions in off-exchange foreign currency 

("forex" or "foreign currency") that are margined or leveraged. 

2. Hagemann lured prospective customers with the prospect of quickly making large 

profits, claiming on at least one occasion that he was making returns of 100% to 300% "every 

couple of months." Hagemann also falsely created the impression of being a well-established 

forex trader by: representing that he had $500 million dollars in investments under his control at 

all times when he did not, that he was registered with the National Futures Association ("NFA") 

when he was not, that he had employees who were registered with the NFA when he did not, that 

he had a trading system that was profitable even when the markets dropped, which was untrue, 

and falsely claiming a connection to deceased former Russian Federation President Boris 

Yeltsin. 

3. Hagemann falsely claimed he was profitably trading forex for investors. He told a 

police officer that he made $20,000 for one of his customers. However, that customer stated that 

Hagemann did not tell him he made a profit or reimburse him for anything more than his initial 

investment. 

4. Contrary to Hagemann's claims, only $200,000 of the approximately $700,000 

that Defendants solicited from customers was ever deposited into actual forex trading accounts, 

and Defendants lost nearly all of that money by trading forex unsuccessfully. By November of 

2009, Hagemann stopped trading the Yellowstone accounts. Instead, Hagemann 

misappropriated the remaining $500,000 in customer funds for personal use or to make purported 

profit payments or return principal to existing customers, in the manner akin to a "Ponzi" 

scheme. 
5. Upon information and belief, Hagemann continues to solicit and accept 

investments claiming that he is trading forex. 

6. Upon information and belief, Hagemann is concealing his trading losses, 

misappropriation, and on-going fraud from actual and prospective customers. 

7. As a result of the conduct described above and the further conduct described 

herein, Defendants have engaged, are engaging, or are about to engage in acts and practices in 

violation of anti-fraud provisions of the Commodity Exchange Act (the "Act"), 7 U.S.C. §§ 1 et 

seq. (2006), as amended by the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-

246, Title XIII (the CFTC Reauthorization Act of 2008 ("CRA")), §§ 13101-13204, 122 Stat. 

1651 (enacted June 18, 2008). 

8. Hagemann, as an agent, employee or officer of Yellowstone Partners, committed 

the acts and omissions described herein within the course and scope of his employment, agency 

or office with Yellowstone Partners; therefore, Yellowstone Partners is liable under Section 

2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2006), and Commission Regulation ("Regulation") 

1.2, 17 C.F.R. § 1.2 (2009), for violations of the Act by Hagemann. 

9. Hagemann is a controlling person of Yellowstone Partners. He failed to act in 

good faith or knowingly induced, directly or indirectly, the acts constituting the violations. 

Hagemann is therefore liable for Yellowstone Partners' violations of the Act pursuant to Section 

13(b) of the Act, 7 U.S.C. § 13c(b) (2006). 

10. Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. § 13a-l (2006), and 

Section 2(c)(2) of the Act as amended by the CRA, to be codified at 7 U.S.C. § 2(c)(2), the 

Commission brings this action to enjoin Defendants' unlawful acts and practices, and to compel 
Defendants to comply with the Act. In addition, the Commission seeks civil monetary penalties 

and remedial ancillary relief, including, but not limited to, trading and registration bans, 

restitution, disgorgement, rescission, pre- and post-judgment interest, and such other relief as the 

Court may deem necessary and appropriate. 

11. Unless restrained and enjoined by this Court, Defendants are likely to continue to 

engage in the acts and practices alleged in this Complaint and similar acts and practices, as more 

fully described below. 

II. JURISDICTION AND VENUE 

12. This Court has jurisdiction over this action pursuant to Section 6c(a) of the Act, 

7 U.S.C. § 13a-l (2006), and Section 2(c)(2)(C)(i)-(iii) of the Act as amended by the CRA, to be 

codified at 7 U.S.C. §2(c)(2)(C)(i)-(iii). Section 6c(a) authorizes the Commission to seek 

injunctive relief in district court against any person whenever it shall appear to the Commission 

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

constituting a violation of the Act or any rule, regulation, or order thereunder. In addition, this 

section authorizes the Commission to bring a civil action in district court to enforce compliance 

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

13. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S. C. 

§ 13a-1(e) (2006), because Defendants are found, inhabit, reside and/or transact business in the 

Eastern District of North Carolina, and certain of the transactions, acts, practices, and courses of 

business alleged to have violated the Act occurred, are occurring, and/or are about to occur 

within this District. 
III. PARTIES 

14. Plaintiff Commodity Futures Trading Commission is an independent federal 

regulatory agency that is charged by Congress with the administration and enforcement of the 

Act, 7 U.S.C. §§ 1 et seq. (2006), as amended by the CRA, and the Regulations promulgated 

thereunder, 17 C.F.R. §§1.1 et seq. (2009). The Commission maintains its principal office at 

Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581. 

15. Defendant Yellowstone Partners, Inc. was incorporated in North Carolina and 

operates out of Raleigh, North Carolina. Yellowstone Partners (NFA ID 0406519) is listed as an 

"Exempt Commodity Pool Operator." The commodity pool listed with Yellowstone Partners, 

Inc. is titled "Yellowstone" (Pool ID P043007), and is claimed to be exempt from registration 

with the NFA under Regulation 4.13(a)(2), 17 C.F.R. § 4.13(a)(2) (2009). 

16. Defendant Dennis Todd Hagemann resides in Raleigh, North Carolina. He 

purchased Yellowstone Partners from Robert Brumbaugh ("Brumbaugh") in November 2009. 

Hagemann is not registered with the NFA as a CPO or in any other capacity. 

IV. FACTS 

Fraudulent Solicitation 

17. Brumbaugh opened accounts in Yellowstone Partners' name at two futures 

commission merchants ("FCMs") on February 3, 2009 and February 9, 2009. The FCMs were 

Forex Capital Markets ("FXCM") and Global Forex Trading ("GFT"). Yellowstone Partners 

used these accounts to trade forex for retail customers. Brumbaugh and Hagemann owned 

Yellowstone Partners, with Hagemann owning 60% of the company. In or about November 
2009, Brumbaugh sold his portion of the Yellowstone operation to Hagemann who continued to 

solicit and receive customer funds. 

18. From inception to present, Yellowstone solicited and received approximately $1.3 

million from retail forex customers. During the relevant period, Defendants fraudulently 

solicited, directly and through others, at least $700,000 from at least nine individuals for the 

purported purpose of trading managed accounts and/or a pooled investment operated and 

managed by Defendants and in connection with agreements, contracts or transactions in offexchange forex that are margined or leveraged. 

19. In his oral solicitations, Hagemann, directly and through others, represented that 

he would trade foreign currency on behalf of customers. 

20. Hagemann solicited customers through personal solicitations and possibly through 

other means. In at least two instances, Hagemann solicited $50,000 through meetings at 

restaurants. 

21. In his oral solicitations, Hagemann falsely claimed experience and success in 

trading foreign currency and lured prospective customers with false promises that they could 

quickly make large profits. He stated that Yellowstone Partners was returning 100% to 300% 

profits to customers every couple of months. He failed to disclose that these claims were false. 

22. As recently as the fall or winter of 2009, Hagemann falsely claimed to have 

Russian contacts that could help his investments. This included an unnamed individual who 

allegedly has connections to former Russian Federation President Boris Yeltsin. Hagemann 

failed to inform the potential investor that Mr. Yeltsin is deceased, and was deceased at the time 

he made the representation. 
23. On information and belief, during the relevant period Hagemann falsely claimed 

that he was investing investors' money in forex when he was misappropriating at least a portion 

of the investments. 

24. On at least one occasion during the relevant period, Hagemann falsely claimed to 

have people working for him and/or Yellowstone Partners who were registered with the CFTC 

and/or NFA. 

25. On at least two occasions during the relevant period, Hagemann failed to disclose 

to his investors that he has been charged with a felony in connection with passing a worthless 

check for $70,000. 

26. On at least one occasion during the relevant period, Hagemann falsely claimed 

that he had $500 million dollars under his control. 

27. On at least one occasion during the relevant period, Hagemann claimed that he 

could not return the investors money when requested, because it would be illegal for him to do 

so. 

28. On information and belief, Hagemann failed to disclose to customers and 

prospective customers that he was operating a Ponzi scheme and misappropriating customer 

funds. 

29. During the relevant period, Hagemann instructed at least one customer to send 

funds directly to him via check so that he could deposit the money in Yellowstone faster. 

30. On information and belief, at least certain of Defendants' customers, if not all, 

were individuals who each had total assets of less than $5 million. 
31. On information and belief, Yellowstone Partners and Yellowstone are entities that 

each has total assets of less than $10 million. 

32. On information and belief, customers and prospective customers relied on 

Hagemann's misrepresentations and omissions in making their decisions to invest and reinvest 

with Defendants. 

Misappropriation 

33. On September 2, 2009, Hagemann received a $50,000 check from one investor to 

trade forex. As instructed by Hagemann in order to speed the deposit of the check into 

Yellowstone Partners, the investor made the check out to Hagemann personally. Hagemann 

deposited the check in his personal account at the North Carolina State Employees' Credit Union 

(NCSECU). 

34. On September 3, 2009, the investor who invested $50,000 with Hagemann on 

September 2, 2009, asked for his money to be returned. Hagemann told him he could not 

remove the money from the investment or write him a check, because that would constitute 

money laundering. Instead, Hagemann told the investor that he would speak to the "trading 

house" to determine when the investor's money would be available, and would get back to him 

by September 8, 2009. On September 17, 2009, the $50,000 was part of a $200,000 deposit into 

the Yellowstone Partners' account at First Citizens Bank. The investor consistently asked for the 

return of his money. The investor's money was not returned until October 22, 2009. 

35. As of the end of October 2009, Yellowstone Partners no longer traded its accounts 

at FXCM and GFT. Nonetheless, upon information and belief, Hagemann continued to solicit 

and accept investments in Yellowstone Partners to trade forex. 
36. Sometime during December of 2009, Hagemann met with a potential investor to 

solicit funds. As part of the conversation, he told her that he had $500 million under his control 

but that he needed her investments to have funds available in case one of the other investors 

asked for the return of his funds. Thus, he implied to this witness that it was his intention to use 

the investor's funds to pay other investors who sought the return of their principle or profit. In 

fact, he did not have $500 million under his control. 

37. Instead of trading investor funds as promised;Hagemann used the hands to repay 

principal and pay purported profitable returns to existing investors in a manner typical of a Ponzi 

scheme. Additionally, upon information and belief, he used investor funds to pay personal 

expenses. Upon information and belief, these expenses include expensive clothing and an Aston 

Martin sports car purchased in cash. 

38. Hagemann knew that his solicitations were untrue because he controlled the 

trading accounts during the relevant period and therefore knew that his forex trading was 

unsuccessful, that he was not trading for a period of time, that he did not actually have $500 

million under his control. Hagemann also knew or recklessly disregarded the fact that he was 

not registered with the NFA and did not have employees so registered. Hagemann knew that he 

was misappropriating the funds because he used customer funds for purposes other than trading. 

V. COUNT ONE: 

Violations of the Commodity Exchange 

Violations of Sections 4b(a)(2)(A)-(C) of the Act, 

as amended by the CRA 

(Fraudulent Solicitation and Misappropriation) 
39. The allegations set forth in paragraphs 1 through 38 are realleged and 

incorporated herein by reference. 

40. Sections 4b(a)(2)(A)-(C) of the Act, as amended by the CRA, to be codified at 

7 U.S.C. §§ 6b(a)(2)(A)-(C), make it unlawful 

for any person, in or in connection with any order to make or the making of, any 

contract of sale of any commodity for future delivery, or other agreement 

on a , or transaction subject to paragraphs (1) and (2) of section 5a g) that is 

made, o to be made, for or on behalf of, or with, any other person, other than on 

^subject to the rules of a designated contract market - (A) to cheat or defraud or 

attempt to cheat or defraud the other person; (B) willfully to make or cause o be 

made to the other person any false report or statement or willfully to ener or 

cause to be entered for the other person any false record; [or] (C) willfully to 

deceive or attempt to deceive the other person by any means whats oeverin ega id 

to any order or contract or the disposition or execution of any order or contiacoi 

in regard to any act of agency performed, with respect to any order or contact for 

or, in the case of paragraph (2), with the other person. 

Sections 4b(a)(2)(A)-(C) of the Act, as amended by the CRA, apply to the foreign currency 

transactions, agreements or contracts offered by Defendants. Section 2(c)(2)(C)(iv) of the Act, 

as amended by the CRA, to be codified at 7 U.S.C. § 2(c)(2)(C)(iv). 

41. On information and belief, as set forth above, from at least September 2009 

through the present, in or in connection with foreign currency contracts, made, or to be made, for 

or on behalf of, or with, other persons, Hagemann cheated or defrauded or attempted to cheat or 

defraud customers or prospective customers; willfully deceived or attempted to deceive 

customers or prospective customers by, among other things, knowingly (i) fraudulently soliciting 

customers and prospective customers; (ii) misappropriating customer funds that purportedly were 

to be used to trade forex; (iii) misrepresenting forex trading activity that purportedly occurred on 

behalf of Yellowstone Partners' customers; (iv) and failing to disclose that Defendants were 

operating a Ponzi scheme and misappropriating customer funds, all in violation of Sections 

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4b(a)(2)(A)-(C) of the Act, as amended by the CRA, to be codified at 7 U.S.C. §§ 6b(a)(2)(A)-

(C). 

42. Yellowstone Partners, by and through its agents and Hagemann engaged in the 

acts and practices described above knowingly or with reckless disregard for the truth. 

43. Hagemann controlled Yellowstone Partners, directly or indirectly, and did not act 

in good faith or knowingly induced, directly or indirectly, Yellowstone Partners' conduct alleged 

in this Complaint; therefore, pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b) (2006), 

Hagemann is liable for Yellowstone Partners' violations of Sections 4b(a)(2)(A)-(C) of the Act, 

as amended by the CRA, to be codifed at 7 U.S.C. §§ 6b(a)(2)(A)-(C). 

44. The foregoing acts, misrepresentations, omissions, and failures of Hagemann's 

occurred within the scope of his employment, office or agency with Yellowstone Partners; 

therefore, Yellowstone Partners is liable for these acts, misrepresentations, omissions, and 

failures pursuant to Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2006), and Regulation 

1.2, 17C.F.R.§1.2(2009). 

45. Each act of misappropriation, misrepresentation or omission of material facts, and 

making or causing to be made a false report or statement, including but not limited to those 

specifically alleged herein, is alleged as a separate and distinct violation of Sections 4b(a)(2)(A)-

(C) of the Act, as amended by the CRA, to be codified at 7 U.S.C. §§ 6b(a)(2)(A)-(C). 

VI. RFI IFF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court, as authorized by 

Section 6c of the Act, 7 U.S.C. § 13a-l (2006), and pursuant to its own equitable powers, enter: 

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a) An order finding that Defendants violated Sections 4b(a)(2)(A)-(C) of the Act, as 

amended by the CRA, to be codified at 7 U.S.C. §§ 6b(a)(2)(A)-(C); 

b) An order of permanent injunction prohibiting Defendants and any of their agents, 

servants, employees, assigns, attorneys, and persons in active concert or participation with any 

defendant, including any successor thereof, from engaging, directly or indirectly: 

(i) in conduct in violation of Sections 4b(a)(2)(A)-(C) of the Act, as amended 

by the CRA, to be codified at 7 U.S.C. §§ 6b(a)(2)(A)-(C); and 

(ii) trading on or subject to the rules of any registered entity (as that term is 

defined in Section la(29) of the Act, 7 U.S.C. § la(29) (2006)); 

(iii) entering into any transactions involving commodity futures, options on 

commodity futures, commodity options (as that term is defined in Regulation 32.1(b)(1), 

17 C.F.R. § 32.1(b)(1) (2009)) ("commodity options"), and/or foreign currency (as 

described in Sections 2(c)(2)(B) and 2(c)(2)(C)(i) of the Act as amended by the CRA, to 

be codified at 7 U.S.C. §§ 2(c)(2)(B) and 2(c)(2)(C)(i)) ("forex contracts") for their own 

personal account or for any account in which they have a direct or indirect interest; 

(iv) having any commodity futures, options on commodity futures, commodity 

options, and/or forex contracts traded on their behalf; 

(v) controlling or directing the trading for or on behalf of any other person or 

entity, whether by power of attorney or otherwise, in any account involving commodity 

futures, options on commodity futures, commodity options, and/or forex contracts; 

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(vi) soliciting, receiving, or accepting any funds from any person for the 

purpose of purchasing or selling any commodity futures, options on commodity futures, 

commodity options, and/or forex contracts; 

(vii) applying for registration or claiming exemption from registration with the 

Commission in any capacity, and engaging in any activity requiring such registration or 

exemption from registration with the Commission, except as provided for in Regulation 

4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2009); 

(viii) acting as a principal (as that term is defined in Regulation 3.1 (a), 17 

C.F.R. § 3.1(a) (2009)), agent or any other officer or employee of any person registered, 

exempted from registration or required to be registered with the Commission, except as 

provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2009); 

c) An order directing Defendants, as well as any successors to any Defendant, to 

disgorge, pursuant to such procedure as the Court may order, all benefits received from the acts 

or practices which constitute violations of the Act, as described herein, and pre- and postjudgment interest thereon from the date of such violations; 

d) An order directing Defendants to make full restitution to every person or entity 

whose funds Defendants received or caused another person or entity to receive as a result of acts 

and practices that constituted violations of the Act, as described herein, and pre- and postjudgment interest thereon from the date of such violations; 

e) An order directing Defendants and any successors thereof, to rescind, pursuant to 

such procedures as the Court may order, all contracts and agreements, whether implied or 

13 
express, entered into between them and any of the customers whose funds were received by them 

as a result of the acts and practices which constituted violations of the Act, as described herein; 

f) An order directing each Defendant to pay a civil monetary penalty for each 

violation of the Act described herein, plus post-judgment interest, in the amount of the higher of: 

$140,000 for each violation of the Act committed on or after October 23, 2008, $130,000 for 

each violation of the Act committed on or between October 23, 2004; or triple the monetary gain 

to each defendant for each violation of the Act described herein, plus post-judgment interest; 

g) An order requiring Defendants to pay costs and fees as permitted by 28 U.S.C. 

§§1920 and 2412(a)(2) (2006); and 

h) Such other and further relief as the Court deems proper. 

Dated: March H ,2010. 

Respectfully submitted by, 

Jason A. Mahoney 

Trial Attorney 

imahoney@cftc.RQv 

D.C. Bar No. 489276 

John Dunfee 

Chief Trial Attorney 

idunfee(5),cftc.gov 

D.C. Bar No. 461549 

Paul Hayeck 

Associate Director 

phaveck(o),cftc.gov 

Massachusetts Bar No. 554815 

Attorneys for Plaintiff 

14 
U.S. Commodity Futures Trading Commission 

Division of Enforcement 

Three Lafayette Centre 

1151 21st Street NW 

Washington, DC 20581 

(202)418-5000 

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