CFTC freezes hedge fund over derivatives 'fraud'

According to a complaint filed by the CFTC, Philadelphia Alternative Asset Management and its president Paul Eustace issued false statements to at least one investor stating that the fund had made gains trading commodity futures and options, and that the investor’s account had increased in value to over $1 million. In fact, the fund never actually traded futures or options, the CFTC claims.

The complaint also claims Eustace concocted fake trading records for two other pools to indicate profits on derivatives trading, when in fact the pools' derivatives accounts had lost 50% of their value. The pools had a total of over $230 million invested, the CFTC complaint says.

The case will come before the Pennsylvania Eastern District Court on August 16. The CFTC, backed by the National Futures Association, is seeking a permanent injunction against Eustace, the return of the money and a further fine.

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