A former commodities trader, who was previously disciplined for defrauding investors, has now been sanctioned for a new scheme.
The U.S. Commodity Futures Trading Commission (CFTC) announced on Tuesday that a default judgment was entered in the U.S. district court for the District of Connecticut against Michael Frederick Staryk and his company, Magestic World Wide Finance, for engaging in an options trading scheme.
In its order, the court ordered Staryk to pay US$547,616 in restitution and a US$5.9-million civil penalty. It also imposed permanent trading and registration bans against him.
According to the order, between 1990 and 1998, Staryk was registered with various derivatives firms. In 1995, he was charged by the CFTC with defrauding retail investors, and in 1998 he was sanctioned by an administrative law judge in that proceeding.
In its latest case, the CFTC alleged that in 2021 through 2022, Staryk and others, “engaged in a deceptive scheme” that involved cold calling prospective clients with claims that they were successful options traders, and offering to trade options on behalf of the investors.
As part of the alleged scheme, the firm, Magestic, purported to be an investment manager specializing in commodities futures and options that operated a low-risk diversified portfolio. It also provided clients with trading reports and account statements.
Yet, in reality, there were no accounts and no trading took place, U.S. authorities alleged. Instead, the clients’ funds were misappropriated.
In October 2022, Staryk signed a plea deal in Texas that saw him plead guilty to one count of conspiracy to commit wire fraud in connection with the scheme. Tuesday’s court order resolves the CFTC’s enforcement action against him.
Separately, the court also entered a consent order against a couple of relief defendants, requiring them to disgorge ill-gotten gains that they received from Staryk.