Release: 4096-98 (CFTC Docket 95-8 and 95-9)

For Release:January 12, 1998

RESPONDENTS ORDERED TO PAY $460,000 IN CIVIL FINES FOR ROLE IN
    INTERNATIONAL COMMODITY SCHEMES AND BARRED FROM THE COMMODITIES INDUSTRY
    FOR AIDING AND ABETTING FRAUD BY TWO GERMAN-BASED BROKERAGE FIRMS

WASHINGTON --The Commodity Futures Trading Commission (CFTC) announced
    today that it has issued an Opinion and Order Making Findings and Imposing
    Remedial Sanctions which imposes cease and desist orders, penalties and
    registration sanctions against three U.S. registered firms and their
    associated persons who were involved in fraudulent commodity schemes
    perpetrated by two German-based brokerage firms. The order settles two CFTC
    administrative complaints filed on March 21, 1995, alleging violations of
    the Commodity Exchange Act (CEA) and CFTC regulations in connection with
    the fraudulent activity, which victimized several hundred European
    investors (See CFTC News Release #3827-95, March 22, 1995)

CFTC complaint #95-9 named FSI Futures, Inc. (FSI), a registered
    non-clearing futures commission merchant (FCM); Robin Rodriguez,
    FSI's president and a registered associated person (AP); Grandview
    Holdings Corporation, a registered introducing broker (IB); and J.
    Michael King, Grandview's president and a registered AP -- all of New
    York. CFTC complaint #95-8, in addition to naming FSI and Rodriguez, also
    named Techno Trading, Inc., a registered IB, and Michael Hjalmer
    Thomas, who is registered as a commodity trading advisor (CTA) and an
    AP of Techno, and is also president and sole principal of Techno -- both of
    Zionsville, Pennsylvania.

Techno Trading Systems, Inc. and Michael Thomas Devised a Scheme That
    Defrauded Customers of $4.3 Million

CFTC complaint #95-8 involved a scheme perpetrated by HOSSE GmbH (and
    related firms) (HOSSE), an Essen, Germany-based brokerage firm, which
    solicited customers to trade in an options strategy known as "butterfly
    spreads." The CFTC found that in 1992, Thomas specifically devised the
    butterfly spread strategy to assist in generating commission income for
    himself and HOSSE.

The CFTC in its order finds that Thomas and Techno cheated and defrauded
    HOSSE's options customers in violation of Section 4c(b) of the CEA and
    regulation 33.10 by designing the butterfly spread trading strategy and
    caused customers to lose $4.3 million -- $3.7 million of which was
    attributable to the commissions. In addition, the order finds Thomas liable
    for fraud in violation of Section 4o (the CEA's anti-fraud provision
    relating to CTAs). Furthermore, the CFTC found that Techno and Thomas
    failed to supervise diligently their employee's handling of the HOSSE
    accounts.

The CFTC order also finds that FSI, the FCM carrying the HOSSE customer
    accounts, and Rodriguez failed to supervise diligently the handling of the
    HOSSE customer accounts because: FSI and Rodriguez were aware that the
    HOSSE accounts were established for individual customers; FSI had knowledge
    that HOSSE exercised discretion over the accounts; FSI and Rodriguez were
    aware that Thomas and HOSSE were trading butterfly spreads at a high
    commission rate; and FSI and Rodriguez were aware of the consistently
    negative effect the strategy had on the ability of HOSSE customers to make
    money over the long term; and that FSI and Rodriguez complied with Thomas'
    "suspicious request" that HOSSE's commissions be paid out in cash, rather
    than via customary wire transfers.

Grandview Holdings Corporation and J. Michael King Aided and Abetted
    Fraudulent Activities in Germany; Robin Rodriguez and FSI Futures, Inc.
    Failed to Supervise Futures Trading of American Trading & Consulting
    GmbH

CFTC Docket No. 95-9 involved a scheme by which American Trading &
    Consulting, GmbH (ATCO), a Hamburg, Germany-based brokerage firm which
    between June 1990 and July 1991 defrauded its customers by placing matched
    buy and sell orders for futures contracts on U.S. futures exchanges. It
    then assigned trades to particular accounts to create a desired pattern of
    profits and losses.

In the order, the CFTC finds that Grandview and King aided and abetted
    ATCO's fraud in violation of Section 4b of the CEA by directly transmitting
    ATCO's orders to FSI's clearing broker in a manner intended to disguise the
    scheme. The CFTC finds that "King, at a minimum, turned a `blind eye'" to
    the numerous indications of potential wrongdoing by the firm and ignored
    numerous irregularities in the handling of the firm's account.

The CFTC also finds that King's willingness to accommodate the unusual
    and suspicious conduct of ATCO contributed significantly to the
    victimization of hundreds of investors. The CFTC order therefore finds that
    Grandview failed to supervise the ATCO accounts.

The CFTC also finds that FSI and Rodriguez failed to supervise
    diligently the handling of ATCO's account. Specifically, the CFTC found
    that Rodriguez "ignored numerous irregularities in the handling of the
    [ATCO] accounts." The CFTC order also finds that FSI failed accurately to
    report financial results of the offsetting futures transactions placed
    within ATCO's accounts in violation of Regulation 1.46 of the CEA.

FSI Futures, Inc. to Pay $450,000 in Civil Monetary Penalty and
    Withdraw from Registration as an FCM; Robin Rodriguez To Withdraw
    Registration as AP

The CFTC order requires FSI to pay a civil monetary in the amount of
    $200,000 for its role in HOSSE's scheme and $250,000 for its role in ATCO's
    scheme. The order also requires FSI and Rodriguez to cease and desist from
    failing to comply with Commission Regulation 1.46 and from failing to
    supervise diligently the activities of its partners, officers, employees
    and agents.

In addition, FSI agreed to withdraw its registration as a FCM and not to
    apply for registration with the Commission in any capacity, other than as
    an IB, and never to engage in any activity requiring such registration, or
    act as an agent or officer of any person registered or required to be
    registered with the Commission.

Rodriguez agreed to withdraw his registration as an AP and not to apply
    for registration as an AP except as an AP of an IB, and not to act in any
    capacity as a principal, AP, or as an agent or officer of any person and/or
    entity registered or required to be registered as a FCM.

Grandview Holdings Corporation and J. Michael King Barred From
    Commodity Industry

The CFTC order requires Grandview and King to cease and desist from
    engaging in fraud and from failing to supervise diligently the activities
    of its partners, officers, employees and agents. The order also revokes the
    registrations of Grandview and King, who agreed never to apply for
    registration with the CFTC in any capacity. The CFTC notes the
    appropriateness of ordering them to pay a monetary penalty but does not
    impose one based on sworn representations concerning their financial
    condition.

Thomas and Techno's Registrations Are Revoked; Thomas To Pay $10,000
    In a Civil Monetary Penalty

The CFTC order requires Techno and Thomas to cease and desist from
    engaging in fraud in connection with commodity options and from failing to
    supervise diligently the activities of its partners, officers, employees
    and agents. The order also requires Thomas to cease and desist from
    engaging in fraud as a commodity trading advisor or commodity pool
    operator. The CFTC order further revokes the registrations of Techno and
    Thomas, who agree not to reapply for registration for five years and orders
    Thomas to pay a civil monetary penalty of $548,000, all but $10,000 of
    which is waived based upon Thomas' demonstrated inability to pay more.
    Thomas further agrees not to reapply for registration at the expiration of
    five years unless he has paid the rest of the civil monetary penalty,
    $538,000.

Criminal Prosecutions in Germany as to the ATCO and HOSSE Customer
    Frauds

The Commission acknowledges the assistance of the Hamburg and Essen
    Germany police authorities and affiliated public prosecutors. A number of
    other individuals responsible for the ATCO and HOSSE customer frauds, none
    of whom was named by the CFTC, were charged and convicted criminally.