FINRA Lawyer Blog
Once in a while, regulators and courts take actions that have no precedent, but which may influence justice over time. That is the case of a recent ruling from a Florida federal judge, who ordered a defendant to disclose that he had “violated commodity laws” whenever he writes or speaks about commodity trading in the future.
The U.S. Commodity Futures Trading Commission announced the ruling in a statement, perhaps in the hope that it might serve to deter potential fraudsters.
The defendant, Anthony J. Klatch II, had been arrested several times since 2011, charged with running a kind of Ponzi scheme, and ordered to pay back $13 million in various civil proceedings. In 2012, for example he was convicted in connection with a $2.3 million investment scam.
While he was out of custody, between April 2014 and September 2015, he managed to run a number of schemes that put him under the radar of the Commodity Futures Trading Commission, which sued him, his company, and partner-in-crime Lindsey Heim.
The CFTC maintains that Klatch reunited with Heim shortly after being released from custody. Together, they set up an ACM, misrepresenting themselves as high-earning traders. To entice investors, Klatch created an alias, “Larry J. Heim,” whom he endowed with a series of degrees from respected institutions, such as Harvard University.
The novelty of the case was that besides seeking civil penalties and injunctions, the CFTC decided to ask the judge to order Klatch to include a detailed list of his past violations whenever he posts online, publishes an article, or gives a speech in any way related to commodities.
The text Klatch is to append to any written or spoken statement includes the following statements,
“I have violated the Commodity Exchange Act and CFTC regulations… After being sued by the CFTC in federal courts in New York and Florida, I have been collectively ordered to pay $13,476,225 in restitution to victims of my illegal conduct. I have also been ordered to pay $1,845,008 in civil monetary penalties for my illegal conduct.”
The required disclosures also include a detailed list of Klatch’s violations of commodity laws. According to a spokesperson from the CFTC, there is no record of such a confessional “affirmative disclosure” requirement being imposed on traders found guilty of similar wrongdoing.
Klatch represented himself in legal proceedings. A choice that may explain why he ended up with a kind of “Scarlet Letter” sewn on his lapel for as long as he continues to work as a trader. Klatch’s mother had once told a reporter that her son had a genius IQ. Klatch himself once described himself in a letter as a “brain surgeon of the market.” It is doubtful that his alleged genius will help him persuade new investors in the light of the compromising disclosures that will be a mandatory addition to his usual sales pitch.
If you are in the securities industry and facing possible legal action, you should speak with an experienced securities lawyer to learn your options. While you might be the best in your industry, at Herskovits PLLC securities law firm, we’re among the best and most experienced in ours. Call Us at 212.897.5410 or Online