A U.S. derivatives trading firm is being sanctioned in a settlement with the U.S. Commodity Futures Trading Commission (CFTC), which found that it improperly allocated trades to its own benefit at the expense of outside investors.
Under a consent order entered by the U.S. district court for the Southern District of Florida, a registered commodity trading advisor and commodity pool operator Systematic Alpha Management LLC, and its owner Peter Kambolin, must pay more than US$2.8 million for defrauding commodity pool investors.
Systematic Alpha offered trading strategies in exchange-traded crypto and foreign exchange futures. According to the order, between January 2019 and November 2021, it executed trades for both its commodity pools and its proprietary accounts side-by-side and “consistently directed profitable trades to their own accounts and assigned losing or less profitable trades to the pools…”
The CFTC said that investors in the firm’s pools were defrauded of US$1.2 million as a result of its trade allocation practices, violating CFTC rules, and misleading pool investors.
The order requires the firm and Kambolin to pay US$1.2 million in restitution and US$1.6 million in disgorgement. They are also banned from registration for six years.
Additionally, another firm owned by Kambolin, Jersey City Partners LLC, which received some of the ill-gotten gains, is jointly liable for US$700,000 of the disgorgement.
Previously, Kambolin also pleaded guilty to one count of conspiracy to commit commodities fraud based on the same conduct. In January 2024, he was sentenced to two years in prison, followed by 18 months of home confinement. He was also ordered to pay US$1.6 million in criminal forfeiture and US$1.2 million in restitution.