Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

U.S. Commodity Futures Trading Commission v. Maverick Asset Management, LLC

United States District Court, M.D. Tennessee, Nashville Division

November 9, 2017

U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
v.
MAVERICK ASSET MANAGEMENT, LLC, et al., Defendants.

          The Honorable David M. Lawson Judge.

          REPORT AND RECOMMENDATION

          JOE B. BROWN United States Magistrate Judge.

         Presently pending is Plaintiff's Amended Motion and Supporting Memorandum for Entry of Default Judgment, Permanent Injunction, Civil Monetary Penalties, and Ancillary Equitable Relief Against Defendants Maverick Asset Management, LLC and Jason Castenir (Docket Entry No. 72).

         For the reasons stated below, the Magistrate Judge recommends that Plaintiff's amended motion for default judgment (Docket Entry No. 72) be GRANTED and that Plaintiff's request for permanent injunction and that Defendants, jointly and severally, pay restitution in the amount of $1, 172, 800 and a civil monetary penalty in the amount of $2, 461, 301, be GRANTED.

         I. BACKGROUND

         Plaintiff, the United States Commodity Futures Trading Commission, filed this action against Defendants Maverick Asset Management, LLC, (“MAM”), Rodney Scott Phelps and Jason T. Castenir for violations of 7 U.S.C. §§ 6b(a)(1)(A)-(C), 6o(1), 6m(1) and 6k(2) (2012). Plaintiff also asserts a claim for violations of 17 C.F.R. §§ 4.20(b)-(c) against Defendant MAM. The complaint alleges that Defendants defrauded at least two members of the public (“pool participants”), one individual and one couple, out of approximately $1.2 million in connection with pooled investments in exchange-traded commodity futures contracts. (Docket Entry No. 1, at ¶¶ 1, 5, 15, 17-18). Defendants allegedly misappropriated over $800, 000 of pool participants' funds, made material omissions to existing and prospective pool participants, provided pool participants with false account statements and operated the pool illegally. Id. at ¶¶ 2, 19, 22-23, 28, 32, 41, 43, 48-49, 53-54.

         On September 29, 2015, Defendant Phelps filed an answer to the Plaintiff's complaint. (Docket Entry No. 31). Defendants MAM and Castenir did not file an answer or otherwise respond to the complaint, and on October 27, 2015, entry of default against Defendants MAM and Castenir was entered by the Clerk of Court. (Docket Entry No. 35). On January 5, 2016, a stay was entered until March 6, 2017, to allow the parties additional time to continue settlement negotiations and to see if Phelps would be indicted in a parallel criminal action. (Docket Entry No. 48). On March 6, 2017, the Magistrate Judge conducted a telephone conference to determine the status of this action, and this action was subsequently referred for a settlement conference. (Docket Entry Nos. 49 and 50). The parties participated in the settlement conference on April 28, 2017, but were unable to reach a settlement. (Docket Entry No. 56).

         On July 5, 2017, Phelps filed a motion to stay proceedings (Docket Entry No. 67), advising that he had been indicted in the parallel criminal action. On July 14, 2017, Plaintiff filed a motion for default judgment (Docket Entry No. 68) against Defendants MAM and Castenir. Plaintiff was given until August 17, 2017, to modify its motion to demand a sum certain so that any necessary hearing on the motion for default would be limited, at most, to its request for injunctive relief. (Docket Entry No. 70). On July 27, 2017, the Court granted Phelps's motion to stay all proceedings against him, pending the conclusion of the criminal action against him, and ordered that the proceedings in this action would continue against MAM and Castenir so long as those proceedings did not concern Phelps individually. (Docket Entry No. 71).

         On August 3, 2017, Plaintiff filed its amended motion for default judgment against Defendants MAM and Castenir. (Docket Entry No. 72).[1] Plaintiff seeks a permanent injunction, restitution in the amount of $1, 172, 800, and a civil monetary penalty in the amount of $2, 461, 301, representing three times Defendants' monetary gains from the fraud.

         Plaintiff has submitted a declaration of Michael Loconte (Docket Entry No. 73-1), a futures trading investigator by the Division of Enforcement of the U.S. CFTC, establishing the amount of funds invested by the pool applicants in the pool operated by MAM; the amount of trading losses in customer funds by the pool; and the dollar amount of deposits from those customers and returned to those customers. Loconte's declaration provides proof of the following particulars:

         Bank and Futures Commission Merchant Accounts and Cash Flow Analysis

         10. Between July 9, 2013 and February 28, 2015 ("Relevant Period"), MAM had: two accounts at CBT; one account at Regions; and one account at BB&T. At the same time, MIH had: four accounts at CBT; one account at Regions; and two accounts at Gain Capital. Those accounts were as follows:

Account Title Number

Line

Bank / Broker Name

Account

Maverick Asset Management

1

Community Trust Bank

***4332

Maverick Asset Management

2

Community Trust Bank

***4753

Maverick Asset Management

3

Regions Bank

***0894

Maverick Asset Management

4

BB&T Bank

***4304

Maverick Asset Management

5

Community Trust Bank

***1699

Maverick Asset Management

6

Community Trust Bank

***9658

Maverick Asset Management

7

Community Trust Bank

***3966

Maverick Asset Management

8

Community Trust Bank

***1378

Maverick Asset Management

9

Regions Bank

***9847

Maverick Asset Management

10

Gain Capital

***2341

Maverick Asset Management

11

Gain Capital

***2616

         11. I examined the bank records covering the Relevant Period, including a line-by-line review of all the credits and debits in each of the MAM and MIH-related bank accounts. Based on my analysis of these bank account records, I was able to determine the approximate amount of funds received from and paid to the Winemillers and Ms. Dillaha as customers of MAM, including funds these customers sent to MIH and the amount ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.