UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Commodity Futures Trading Commission, 

Plaintiff,

v.

Long Leaf Trading Group, Inc., James A. 

Donelson, Timothy M. Evans, Jeremy S. 

Ruth, and Andrew D. Nelson, 

Defendants.

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Case No. 20-3758

Hon. Thomas A. Durkin

PLAINTIFF CFTC’S REPLY IN SUPPORT OF MOTION FOR PARTIAL SUMMARY 

JUDGMENT AGAINST DEFENDANT JAMES A. DONELSON

Donelson fails to raise a genuine issue of material fact for trial in response to the CFTC’s 

motion for summary judgment. He doesn’t really try. 

Donelson offers no meaningful defense—factually or legally—to the CFTC’s fraud 

claims. Donelson admits that substantially everyone who participated in Long Leaf’s options 

trading program lost money doing so. Donelson admits that he knew this material fact, but 

omitted to disclose it to customers or prospective customers. Donelson does not dispute making

any of the statements, directly or via APs, which form the basis for the CFTC’s fraud claims, i.e.:

Donelson provided “track records” of selected trades to customers and prospective customers 

reflecting positive trading results; Donelson touted his experience at large trading firms despite 

having no profitable trading experience; APs made various rosy statements of profit potential to 

customers and prospective customers, e.g., the trading program targets 6-12% annual returns and 

confers a “statistical advantage.” 

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Donelson offers a declaration from a purported expert saying that Donelson’s trading 

recommendations to Long Leaf customers “could” have made money. This is irrelevant. 

Donelson admits that the recommended trades did not make money. The undisputed evidence 

shows that trading program participants lost more than $2.3 million during Donelson’s tenure at 

Long Leaf.

As for the CFTC’s non-fraud claims, Donelson mostly fails to address them. For the 

claims related to CTA registration, Donelson seeks to invoke an advice-of-counsel defense based 

on purported advice from a lawyer that Long Leaf didn’t have to register as a CTA. This is all 

for naught though, since these are strict-liability violations. Accordingly, the CFTC respectfully 

requests that the Court grant its motion for summary judgment against Donelson. 

I. ANALYSIS

A. There is no issue of material fact that Donelson knowingly made material 

misstatements and omissions to customers and prospective customers.

1. Donelson admits that he knowingly omitted to disclose to customers that 

substantially everyone who participated in Long Leaf’s trading program lost 

money. 

Donelson does not dispute that substantially all customers lost money participating in 

Long Leaf’s trading program. (Doc. 96-1, Donelson SOF Resp. ¶¶ 26-30.) Nor does Donelson

dispute that he deliberately omitted to disclose these losses to customers and prospective 

customers, and instructed Long Leaf’s APs to do the same. (Id. ¶¶ 47-51.)

Donelson argues that he had “no reason to disclose losses” incurred by customers prior to

his acquisition of the company in December 2017 because those losses were incurred “under a 

different trading model” than the one utilized during his tenure. (Doc. 96, Donelson Resp. at 3.)

There are two problems with this argument. The first and most obvious one is that 

Donelson also omitted to disclose to customers and prospective customers losses incurred by 

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trading program participants after Donelson took over. (Doc. 96-1, Donelson SOF Resp. ¶¶ 27-

30, 47-49.) These losses—totaling more than $2.3 million—are attributable entirely to 

Donelson’s own “trading model.” (Id.) Donelson does not deny, or even attempt to defend, this 

deliberate, material omission.

The second problem with Donelson’s argument is that a material omission is determined 

not by what Donelson thought was “reasonable,” but what an investor would find important in 

deciding whether to participate in Long Leaf’s trading program. An objectively reasonable 

investor would want to know that substantially all previous participants in Long Leaf’s trading 

program had lost money. CFTC v. R.J. Fitzgerald & Co., 310 F.3d 1321, 1332-33 (11th Cir. 

2002).

1

 This would be true even if the firm was under new management, and even if the 

“model” behind the program had changed. 

2. Donelson fails to crate an issue of fact as to whether the “track records” sent 

to customers and prospective customers showing profitable trading were 

false or misleading. 

Starting in February 2019 and continuing through at least October 2019, Donelson 

created and distributed to customers and prospective customers, directly or through the APs, 

“track records” showing profitable trading results. (Doc 96-1, Donelson SOF Resp. ¶¶ 58-66.) 

Donelson admits this. (See id.) Donelson “objects,” however, to the CFTC’s characterization of 

certain track records as “hypothetical” (as opposed to merely “cherry-picked”), on the grounds 

that the trades “did occur.” (Doc. 96-1, Donelson SOF Resp. ¶¶ 59, 61, 66; see also Doc. 96, 

 1 See also, e.g., CFTC v. Risk Cap. Trading Grp., Inc., 452 F. Supp. 2d 1229, 1245 (N.D. Ga. 2006)

(“Siegel’s nondisclosure of his and Risk Capital’s track record-which the Court found he knew by the fall 

of 2002-was a material omission of fact. Plaintiff established that approximately 97% of Risk Capital's 

customers lost money.”); CFTC v. Matrix Trading Grp., Inc., No. 00-8880-CIV, 2002 WL 31936799, at 

*8 (S.D. Fla. Oct. 3, 2002) (“Given that 92% of Matrix's customers lost money and that those losses 

began accruing from the outset, and given that Matrix’s principals either were aware or should have been 

aware of the true state of affairs, this Court finds that their claims of profit and profit potential were made 

with knowledge of their falsity or, at the very least, with reckless disregard for the truth.”)

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Donelson Resp. at 4-5.) Donelson fails to offer evidence in support of this claim, which is 

contravened by Donelson’s own deposition testimony: 

Q All right. So CFTC Exhibit 200 reflects hypothetical results for an account if that 

account traded one contract for all of the recommendations that Long Leaf provided 

between June and September of 2019, is that right?

A Correct.

(Doc. 77-18, CFTC Ex. 531, Donelson Dep. at 178:13-18; see also id. at 159:22 – 161:5 (“I 

don’t believe any one person had every one of those trades.”).)2

 

In any event, Donelson’s argument fails to address the CFTC’s fundamental point with 

respect to these track records. The point is that these track records are false or misleading

because they reflect positive trading results at a time when customers were losing millions of 

dollars as a result of Long Leaf’s trading program. Donelson does not deny these facts. (Doc. 

96-1, Donelson SOF Resp. ¶¶ 58-66.)

3. Donelson admits that he failed to disclose his lack of trading experience to 

customers or prospective customers. 

Donelson admits that he has no experience trading options professionally, and that he 

made just one options trade for his personal account before taking over Long Leaf.3

 (Doc. 96-1, 

Donelson SOF Resp. ¶¶ 53-56.) Despite this lack of trading experience, Donelson told 

customers that he had “10 years of financial and business development experience at two of the 

largest proprietary trading companies.” (Id. ¶ 53.) 

 2 Because Donelson’s factual assertion is controverted by his deposition testimony, it must be 

disregarded. See, e.g., FTC v. Bay Area Bus. Council, Inc., 423 F.3d 627, 634 (7th Cir. 2005) (holding 

that a party cannot create an issue of fact with an affidavit containing conclusions that contradict sworn 

testimony).

3 That trade lost money. (Doc 96-1, Donelson SOF Resp. ¶ 55.)

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In his response to the CFTC’s statement of facts, Donelson “denies” that he omitted to 

disclose his lack of trading experience to customers. (Doc. 96-1, Donelson SOF Resp. ¶ 57.) He 

also “denies” that this omission was material to customers or prospective customers. (Id.) 

Donelson fails to adduce any evidence in support of his position and his citations to the record do 

not show that Donelson disclosed to customers or prospects his lack of experience. Moreover, 

Donelson’s denials are directly contradicted by his deposition testimony:

Q All right. So did you tell customers that you really didn’t have any profitable 

experience trading options on futures?

A No.

Q And, in fact, you told customers that you had over 30 years of business 

experience, including 10 years of financial and business development experience, in two 

of the largest proprietary trading companies. That’s what you told customers, right?

A Yes.

****

Q Mr. Donelson, do you think customers of Long Leaf would have wanted to take 

your trading recommendations if they knew that you had no profitable trading 

experience?

A No.

(Doc. 77-18, CFTC Ex. 531, Donelson Dep. at 80:13-23, 81:19-23.)

4. AP statements about “target” returns of 6-12% were materially false and 

misleading. 

Donelson admits that he knew and approved of Long Leaf APs telling customers and 

prospective customers, inter alia, that the trading program “target[s] 6 to 12 percent return on an 

annual basis.” (Doc. 96-1, Donelson SOF Resp. ¶ 46.) Donelson argues that these statements 

were neither false nor misleading because they were “hypothetical” and referred to a “target” rate 

of return. (Doc. 96, Donelson Resp. at 6.) 

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Donelson’s argument is without merit. There is no customer of Long Leaf who obtained 

6-12% annual returns, or anything close to it. (Doc. 96-1, Donelson SOF Resp. ¶¶ 26-27, 30.) 

To the contrary, substantially all customers who participated in the trading program lost 

money—more than $2.3 million during Donelson’s tenure alone. (Id.) Under these 

circumstances, it highly misleading (if not outright false) for Long Leaf APs to make statements 

about potential profits. See CFTC v. Kratville, 796 F.3d 873, 895 (8th Cir. 2015).

4

 These 

statements had no basis in reality.

B. Donelson’s so-called expert creates no issue of fact as to Donelson’s scienter.

Donelson argues that the declaration of his purported expert witness, John Burnside, 

creates an issue of material fact as to Donelson’s scienter.5

 (Doc. 96, Donelson Resp. at 6-7.) 

That is ridiculous. 

Burnside opines that “the trading strategy for the recommended option trades under 

Donelson’s supervision, could not only make money, but given the environment, [it] made sense 

to recommend those option positions.” (Doc. 96-3, Burnside Decl. at 3.) Whether the trade 

 4 See also, e.g., SEC v. Falor, No. 1:09-CV-5644, 2010 WL 3385510, at *4 (N.D. Ill. Aug. 19, 2010) 

(denying motion to dismiss where defendant made “financial projections” but “lacked any reasonable 

basis to assume that the promised returns would materialize.”); SEC v. Kirkland, 521 F. Supp. 2d 1281, 

1298 (M.D. Fla. 2007) (granting summary judgment for SEC where defendant touted expected profits; 

“though the ... the ads often utilized the single words ‘projected’ or ‘estimated,’ projections are 

nonetheless actionable as misrepresentations if there is no reasonable basis to support them.”); SEC v. 

USA Real Est. Fund 1, Inc., 30 F. Supp. 3d 1026, 1034 (E.D. Wash. 2014) (granting summary judgment 

for SEC; “had investors known that his basis for projecting the unrealistically high returns was 

[defendant’s] personal belief, they could have understood the real risk of giving their money to 

[defendant]”); SEC v. Constantin, 939 F. Supp. 2d 288, 306 (S.D.N.Y. 2013) (granting summary 

judgment for SEC where defendant “had no basis for [ ] optimistic projections”); SEC v. Concorde Am., 

Inc., No. 05-80128-CIV, 2007 WL 9706715, at *3 (S.D. Fla. July 19, 2007) (granting summary judgment 

where defendant had “no basis for making the projections” in report provided to investors; “[t]he fact that 

the company had no revenue to speak of and was still in a start-up phase at the time a prospectus report is 

projecting millions is profit is a fact that investors would value”)

5 At least that’s what the CFTC assumes he’s arguing. Donelson’s brief actually says, “the testimony of 

Donelson’s expert, which remains uncontested, discloses a finding of scienter.” (Doc. 96, Donelson 

Resp. at 6-7.)

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recommendations “could” make money, or whether it “made sense” to recommend those trades, 

is irrelevant to the question of Donelson’s scienter.6 The undisputed facts establish that 

Donelson was aware that customers lost money from the recommended trades. (Doc. 96-1, 

Donelson SOF Resp. ¶¶ 26-37.) Despite this awareness, Donelson omitted to disclose this fact to 

customers or prospective customers and provided them—personally or via the APs—with 

cherry-picked or hypothetical “track records” and rosy statements about 6-12% annual returns 

and Long Leaf’s “statistical advantage.” (Id. ¶¶ 47-51, 53-55, 58-66.) Donelson’s scienter is 

conclusively, objectively established as a matter of law by the undisputed facts. 

C. Long Leaf was a CTA and required to register as such. 

1. Long Leaf was a CTA.

Donelson argues that Long Leaf is not a CTA, and so Donelson cannot be held liable as a 

controlling person for CTA fraud (Count II), fraudulent advertising by a CTA (Count III), failure 

to register as a CTA (Count IV), or failure to make disclosures required of a CTA (Count V). 

(Doc. 96, Donelson Resp. at 7-9.) Donelson adduces no evidence and offers no legal argument 

for the proposition that Long Leaf is not a CTA. It definitely is. To qualify as a CTA, an entity 

 6 Burnside does not purport to opine that Donelson’s trades were profitable. Burnside testified that his 

opinion does not rely on any information concerning the actual results of the trades. (Doc. 96-4, Burnside 

Dep. at 193:24–194:7 (Burnside had access to certain “information and documents that reflected Long 

Leaf Trading’s commission rates and its profit and loss information but [he] didn’t include that in [his] 

analysis”).) Burnside testified that his “opinion in this case is limited only to the opinion that in 2018 and 

2019 Long Leaf implemented trades that can be categorized as broken butterflies, calendar spreads and

gut strangles.” (Id. at 195:4–195:10.) Burnside did not attempt to analyze whether Long Leaf’s trades 

were likely to make money. (Id. at 80:16–80:20, 94:4–94:19, 203:20–204:23.) In opining that 

Donelson’s trades “made sense,” Burnside admits that he failed to consider the impact of commissions 

charged by Long Leaf. (Id. at 86:19–87:2, 126:22–127:14; see also id. 171:19–24 (agreeing that he could 

amend his opinion to read “Long Leaf’s trades made sense if you ignore all costs”).) This is a significant

oversight because more than $1.2 million of customer losses consist of commission payments. (Doc. 96-

1, Donelson SOF Resp. ¶ 31.) As shown by these testimony excerpts, Burnside’s opinions are not 

relevant and would therefore not assist the jury to determine whether Donelson acted with scienter. See 

Fed. R. Evid. 702. Should this case proceed to trial, the CFTC reserves the right to further challenge the 

admissibility of Burnside’s opinion testimony.

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need only: (1) be engaged in the business of advising others as to the value or of the advisability 

of trading in, in relevant part, options on commodity futures contracts, and (2) do so for 

compensation or profit. 7 U.S.C. § 1a(12)(A). Donelson does not dispute that Long Leaf 

satisfies these criteria. (Doc. 96-1, Donelson SOF Resp. ¶¶ 14-16, 19, 21.) 

2. Long Leaf was required to register as a CTA.

Donelson next argues that Long Leaf was exempt from having to register as a CTA under 

17 C.F.R. § 4.14(a)(6).7 (Doc. 96, Donelson Res. at 8-10.) Donelson argues that an exemption 

applies because Long Leaf “did not have [ ] discretion over [customer] trades,” and had to obtain 

customer approval before executing the recommended trades. (Id. at 9.) The fact that Long Leaf 

lacked discretionary authority over customer accounts does not exempt it from having to register 

as a CTA. 

17 C.F.R. § 4.14(a)(6) provides an exemption from registration as a CTA if a person 

otherwise acting as a CTA is already registered as an introducing broker (“IB”), and if “the 

person’s trading advice is issued solely in connection with its business as an introducing 

broker.”8

 An IB which “guides” trading in the majority of its customer account is not providing 

advice solely in connection with its business as an IB. Clarification of Issues Concerning 

Guided Accounts of Introducing Brokers and Futures Commission Merchants, CFTC Letter No. 

 7 The CFTC’s claims against Donelson for CTA fraud and fraudulent advertising by a CTA apply 

regardless of whether a CTA is exempt from registration. 17 C.F.R. § 4.15 (2019) (7 U.S.C. § 6o(1) shall 

apply to a CTA even if the CTA is exempt from registration); 17 C.F.R. § 4.41(c)(2) (2019) (CTA and 

CPO advertising provisions apply “[r]egardless of whether the commodity pool operator or commodity 

trading advisor is exempt from registration under the Act”). Donelson’s registration argument is therefore 

only relevant to the CFTC’s claims for failure to register as a CTA (Count IV) and failure to make 

disclosures required of a CTA (Count V) under 17 C.F.R. § 4.31(a), which, by its terms, applies only to 

CTAs that are registered or required to be registered as such.

8 The business of an IB is to solicit or accept orders for the purchase or sale of, inter alia, commodity 

options, futures, or options on commodity futures. 7 U.S.C. § 1a(31).

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95-82, 1995 WL 707862 (Sept. 19, 1995).9 Rather, such an IB is “acting primarily as a CTA.” 

Id. Even if the IB/CTA lacks discretionary control over the account, “the CTA is expected to 

influence the trading decisions made by the ‘guided account’ customer.” Id. “While the 

customer is free to deviate from the selections proposed by the CTA, the customer is not likely to 

do so to any significant degree.” Id. 

This reasoning applies to Long Leaf. Through its trading program, Long Leaf guided 

customer accounts with recommendations for specific spread trades on out-of-the money 

options-on-futures contracts. (Doc. 96-1, Donelson SOF Resp. ¶¶ 14-16.) Long Leaf did this for 

the vast majority of customer accounts. (Id. ¶ 23.) Moreover, customers rarely deviated from 

Long Leaf’s recommendations, accepting them between 80% and 85% of the time. (Id. ¶ 24.) 

Long Leaf was therefore acting primarily as a CTA, and required to be register as such.10

3. Donelson has no advice-of-counsel defense.

Donelson seeks to invoke an advice-of-counsel defense, arguing that a private attorney 

named Rebecca Wing told him that Long Leaf did not have to register as a CTA. (Doc. 96, 

Donelson Resp. at 9-10.) This argument is without merit. 

 9 See also Section 4m(1) of the Act; Applicability of Commodity Trading Advisor Registration 

Requirements to a Futures Commission Merchant’s and an Introducing Broker’s Use of a Commodity 

Interest Trading System, CFTC Letter No. 96-17, 1996 WL 100977 (Feb. 9, 1996) (opining that an IB’s 

use of a trading system “as a means to solicit discretionary trading authority over or effectively ‘guide’ 

certain accounts could require registration a CTA”).

10 In support of his argument, Donelson cites a no-longer-available “notice” from the NFA, which he fails 

to attach and for which he fails to provide a web address. (Doc, 96, Donelson Resp. at 8-9.) According to 

Donelson, the notice suggests that discretion over customer trades is a “key consideration” in determining 

whether a CTA has to register. (Id.) It is, but not in the way Donelson suggests. 17 C.F.R. 

§ 4.14(a)(9)(i) provides that none of its exemptions to registration apply if the CTA is “directing client 

accounts,” i.e., engaging in discretionary trading. See 17 C.F.R. § 4.10(f) (defining “direct” as an 

“agreement[ ] where a person is authorized to cause transactions to be effected for a client’s ... account 

without the client’s specific authorization”). The fact that Long Leaf does not engage in discretionary 

trading of client accounts does not therefore entitle it to an exemption from registration. In other words, 

discretion is sufficient but not necessary to trigger CTA registration for IBs.

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As the Seventh Circuit explained, “[t]here is no such thing as an ‘advice of counsel’

defense ...” United States v. Urfer, 287 F.3d 663, 665–66 (7th Cir. 2002). The advice a 

defendant receives from counsel is only relevant “if a [ ] statute requires proof that the defendant 

knew he was violating the statute in order to be [ ] liable for the violation.” Id. 

The statute which mandates registration of CTAs, 7 U.S.C. § 6m(1), contains no such 

requirement. Failure to register as a CTA is a strict-liability offense with no mens rea

requirement, and certainly no requirement of proof that a defendant know he or she is in 

violation of the statute. See CFTC v. JBW Capital, 812 F.3d 98, 106 (1st Cir. 2016) (holding that

violation of 7 U.S.C. § 6m(1) “is a strict liability offense,” and so the defendant “cannot raise a 

reliance on professionals defense”).11

II. CONCLUSION

As set forth above, Donelson does not meaningfully dispute the CFTC’s statement of 

facts. Nor does Donelson make any intelligible legal arguments in support of his position. 

According, the CFTC respectfully requests that the Court grant its motion for summary 

judgment. Since Donelson fails to contest—and in fact admits to—the CFTC’s calculation of 

customer losses and commissions (Doc. 96-1, Donelson SOF Resp. ¶¶ 28-31), the CFTC 

requests that the Court enter an order for payment restitution in the amount of $2,376,738, and 

payment of restitution in the amount of $1,235,413.

 11 Donelson’s personal liability for Long Leaf’s failure to register derives from 7 U.S.C. § 13c(b), which 

holds controlling persons liable to the same extent as the primary violator. 7 U.S.C. § 13c(b) requires 

only that the controlling person knew of the “core activities that constitute the violations at issue,” as 

Donelson unquestionably did. CFTC v. Hunter Wise Commodities, LLC, 1 F. Supp. 3d 1311, 1323 (S.D. 

Fla. 2014). It does not require proof that the defendant knew the conduct was unlawful or that he 

intended to violate the law. Id. As such, Donelson cannot avail himself of an advice-of-counsel defense 

with respect to his controlling person liability. 

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/s/ Ashley J. Burden

Ashley J. Burden

aburden@cftc.gov

Elizabeth M. Streit

estreit@cftc.gov

Jody Platt

jplatt@cftc.gov

Counsel for Plaintiff CFTC

Commodity Futures Trading Commission

Division of Enforcement

525 W. Monroe St., Ste. 1100

Chicago, IL 60661

(312) 596-0700

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CERTIFICATE OF SERVICE

I hereby certify that on March 25, 2022, I provided service to the persons listed below, 

and by the following means:

Via the Court’s electronic CM/ECF system: Via email, pursuant to D.E. 13, to:

Jim Falvey 

Falvey Law Office

200 S. Wacker Dr., Ste. 3100

Chicago, IL 60606-5877

jimfalvey@yahoo.com

Counsel to Long Leaf Trading Group, Inc. 

and James A. Donelson

Andrew D. Nelson

267 May St. E.

Elmhurst, IL 60126

adnelson0503@gmail.com

Pro se

Via email, pursuant to agreement, to:

Jeremey S. Ruth

11220 Brista Way

Austin, TX 78726

jeremysruth@hotmail.com

Pro se

/s/ Ashley J. Burden

Ashley J. Burden

Commodity Futures Trading Commission

Division of Enforcement

525 W. Monroe St., Ste. 1100

Chicago, IL 60661

(312) 596-0700

aburden@cftc.gov

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