Judge gavel, scales of justice and law books in court

U.S. authorities have charged the head of a managed fund firm with fraud in connection with an alleged investment scheme.

In a civil enforcement complaint, the U.S. Commodity Futures Trading Commission (CFTC) has charged Fabio Bretas de Freitas, CEO of Miami-based Phy Capital Investments LLC, a commodity pool operator and commodity trading advisor, with fraud and misappropriation. The allegations have not been proven.

In its complaint, the regulator alleged that Bretas de Freitas and PCI fraudulently solicited at least US$7.8 million from investors for its commodity pools or managed futures funds, amid claims that their proprietary trading software generated large returns. The CFTC said that those claims were false, and that only $155,000 of investors’ money was ever put into a trading account.

Instead, it alleged that the defendants misappropriated investors’ funds to make payments to other investors, and to pay personal expenses.

The CFTC also charged that the defendants sent clients false account statements, and that Breitas de Freitas made false statements to the industry self-regulatory organization, the National Futures Association (NFA), in an effort to cover up the scheme.

“As alleged, defendants lied to the NFA, and lied to their clients while taking millions of their dollars instead of trading their funds,” James McDonald, director of enforcement at the CFTC, said in a statement.

Separately, the U.S. Attorney for the Southern District of New York also indicted Bretas de Freitas on six counts of bank fraud, wire fraud, commodities fraud, conspiracy to commit wire fraud and commodities fraud, and aggravated identity theft. Those allegations also have not been proven.

In its case, the CFTC is seeking restitution to defrauded clients, disgorgement of ill-gotten gains, a monetary penalty, and permanent registration and trading bans.