U.S. Commodity Futures Trading Commission v. Stroud et al (MAG+)

Filing 24

ORDER that, pending further order of the court, the joint motion to approve consent order and the motion for preliminary injunction (doc. nos. 9 and 23 ) are granted (with the hearing set for April 3, 2012, canceled) and Defendants are restrained and enjoined, as fully set out in order; that this order supersedes the Restraining Order entered by the court on March 7, 2012; that this order shall remain in full force and effect until further order of this court upon application, notice, and an opportunity to be heard, and that this court retains jurisdiction of this matter for all purposes. Signed by Honorable Judge Myron H. Thompson on 4/2/2012. (Attachments: # 1 Civil Appeals Checklist)(cc, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION

U.S. COMMODITY FUTURES
TRADING COMMISSION,

)
)
)
Plaintiff,
)
)
v.
)
)
JOHN DAVID STROUD, STROUD )
CAPITAL MANAGEMENT, LLC,
)
TS CAPITAL PARTNERS, LLC, )
and TS CAPITAL MANAGEMENT, )
LLC,
)
)
Defendants.
)

CIVIL ACTION NO.
3:12cv203-MHT
(WO)

ORDER
On March 5, 2012, plaintiff Commodity Futures Trading
Commission

(“Commission”)

filed

a

complaint

seeking

injunctive and other equitable relief under the Commodity
Exchange

Act

against

defendants

John

David

Stroud

(“Stroud”), Stroud Capital Management, LLC, TS Capital
Partners,

LLC,

and

TS

Capital

(collectively, “Defendants”).

Management,

LLC

On March 7, 2012, this

court entered a restraining order against the Defendants.
The

parties

have

subsequently

agreed

to

conditions,

detailed below, of a preliminary injunction.

For their

part, the Defendants, without admitting or denying the
allegations of the complaint and solely for the purposes
of this consent order for preliminary injunction (except
as to jurisdiction and venue, which they admit) have
consented to this order and affirmatively state that
their consent is entered into voluntarily and that no
promise or threat has been made by the Commission or any
member, officer, agent, or representative thereof to
induce them to consent to this order.
The parties agree and the court finds:
1. Jurisdiction over the subject matter of this case
is proper pursuant to 7 U.S.C. § 13a-1, which authorizes
this court to enter a temporary injunction against the
Defendants.
2.

Venue is proper pursuant to 7 U.S.C. § 13a-1(e).

3.

Defendants have waived the entry of findings of

facts and conclusions of law for purposes of this order
pursuant to Federal Rule of Civil Procedure 52(a)(2).

2

For purposes of this order, the following definitions
apply:
4.

“Assets” means any legal or equitable interest

in, right to, or claim to any real or personal property,
including,

but

not

limited

to,

chattels,

goods,

instruments, equipment, fixtures, general intangibles,
effects, leaseholds, mail or other deliveries, inventory,
checks, notes, accounts (including bank accounts and
accounts

at

receivables,
(including

financial
lines

spot

of

and

institutions),

credit,
futures

credits,

securities,

contracts

contracts),

insurance

policies, and all cash, wherever located.
5.

“Document” is synonymous in meaning and equal in

scope to the usage of the term in Federal Rule of Civil
Procedure 34(a)(1)(A).

A draft or non-identical copy is

a separate document within the meaning of the term.
6.

“Defendants” refers to John David Stroud, Stroud

Capital Management, LLC, TS Capital Partners, LLC, and TS
Capital Management, LLC, any person insofar as he or she

3

is acting in the capacity of an officer, agent, servant,
or employee of any of Defendants, and any person who
receives actual notice of this Order by personal service
or otherwise, including email, facsimile, United Parcel
Service, or Federal Express, insofar as he or she is
acting

in

concert

or

participation

with

any

of

Defendants.

***
It is ORDERED that, pending further order of the
court, the joint motion to approve consent order and the
motion for preliminary injunction (doc. nos. 9 and 23)
are granted (with the hearing set for April 3, 2012,
canceled) and Defendants are restrained and enjoined
from, directly or indirectly:
A.

(A) cheating or defrauding, or attempting to

cheat or defraud, any other person; (B) willfully making
or causing to be made to any other person any false
report or statement, or willfully entering or causing to

4

be entered for any other person any false record; or
(C) willfully deceiving, or attempting to deceive, any
other person,
i.

in or in connection with any order to make,

or the making of, any contract of sale of any commodity
in interstate commerce or for future delivery that is
made, or to be made, on or subject to the rules of a
designated contract market, for or on behalf of such
other person, in violation of 7 U.S.C. § 6b(a)(1)(A)-(C);
or
ii.

in or in connection with any order to make,

or the making of, any contract of sale of any commodity
for future delivery, or swap, that is made, or to be
made, for or on behalf of, or with, such other person,
other than on or subject to the rules of a designated
contract market, in violation of 7 U.S.C. § 6b(a)(2)(A)(C);
B.
defraud

employing any device, scheme, or artifice to
any

prospective

or

5

actual

commodity

pool

participant, or engaging in any transaction, practice, or
course of business that operates as a fraud or deceit
upon

any

prospective

participant,

by

use

of

or

actual

the

mails

commodity
or

any

pool

means

or

instrumentality of interstate commerce, in violation of
7 U.S.C. § 6o(1);
C.

willfully falsifying, concealing, or covering up

by any trick, scheme, or artifice a material fact, making
any

false,

fictitious,

or

fraudulent

statements

or

representations, or making or using any false writing or
document

knowing

fictitious,

or

the

same

fraudulent

to

contain

statement

or

any
entry

false,
to

a

registered entity, board of trade, swap data repository,
or futures association designated or registered under the
Commodity Exchange Act and acting in furtherance of its
official duties under the Commodity Exchange Act, in
violation of 7 U.S.C. § 13(a)(4);
D.

making

use

of

the

mails

or

any

means

or

instrumentality of interstate commerce in connection with

6

a

commodity

registered

pool

with

operator

the

business

Commission

under

without
the

being

Commodity

Exchange Act, in violation of 7 U.S.C. § 6m(1); and
E.

being associated with a commodity pool operator

as a partner, officer, employee, consultant, or agent (or
any

person

occupying

a

similar

status

or

performing

similar functions), in any capacity that involves (i) the
solicitation
participation

of
in

funds,
a

securities,

commodity

or

pool,

property
or

(ii)

for
the

supervision of any person or persons so engaged, without
being registered with the Commission under the Commodity
Exchange Act as an associated person of that commodity
pool operator, in violation of 7 U.S.C. § 6k(2).
It is further ORDERED that, pending further order of
the court, Defendants are restrained and enjoined from,
directly or indirectly:
A.

trading on or subject to the rules of any

registered entity (as that term is defined in 7 U.S.C.

7

§

1a),

including,

but

not

limited

to,

trading

for

themselves or others;
B.

entering

commodity

into

futures,

any

options

transactions
on

involving

commodity

futures,

commodity options (as that term is defined in 17 C.F.R.
§ 1.3(hh) (2011)) (“commodity options”), security futures
products,

and/or

7

§§

U.S.C.

contracts”),

foreign

2(c)(2)(B)
for

the

currency
and

(as

described

2(c)(2)(C)(i))

personal

account

of

in

(“forex
any

of

Defendants or for any account in which any of Defendants
have a direct or indirect interest;
C.

having

any

commodity

futures,

options

on

commodity futures, commodity options, security futures
products, and/or forex contracts traded on behalf of any
of Defendants;
D.

controlling or directing the trading for or on

behalf of any other person or entity, whether by power of
attorney or otherwise, in any account involving commodity

8

futures, options on commodity futures, commodity options,
security futures products, and/or forex contracts;
E.

soliciting, receiving, or accepting any funds

from any person for the purpose of purchasing or selling
any commodity futures, options on commodity futures,
commodity

options,

security

futures

products,

and/or

forex contracts;
F.

applying for registration or claiming exemption

from registration with the Commission in any capacity,
and engaging in any activity requiring such registration
or

exemption

from

registration

with

the

Commission,

except as provided for in 17 C.F.R. § 4.14(a)(9) (2011);
and
G.

acting as a principal (as that term is defined in

17 C.F.R. § 3.1(a) (2011)), agent, or any other officer
or employee of any person (as that term is defined in 7
U.S.C. § 1a) registered, exempted from registration, or
required to be registered with the Commission, except as
provided for in 17 C.F.R. § 4.14(a)(9) (2011).

9

It is further ORDERED that Defendants are restrained
and enjoined from, directly or indirectly, withdrawing,
transferring,
disposing

of

removing,
any

wherever

located,

property

held

dissipating,

funds,

assets,

including

outside

ordered by the court.

the

or

funds,
United

or

otherwise

other

property,

assets,
States,

or

other

except

as

The assets affected by this

paragraph shall include both existing assets and assets
acquired after the effective date of this order, as well
as accounts not specifically identified below.
It is further ORDERED that, pending further order of
the court, any bank, financial or brokerage institution,
entity, or person that holds, controls, or maintains
custody

of

(or

has

held,

controlled,

or

maintained

custody of at any time since February 1, 2008) any funds,
assets, or other property of Defendants, and who receives
notice of this order by any means, including email,
facsimile, United Parcel Service, or Federal Express,
shall:

10

A.

prohibit Defendants and any other person from

withdrawing,

removing,

transferring,

dissipating,

or

otherwise disposing of any such assets;
B.

deny Defendants and all other persons access to

any safe deposit box that is:
i.

titled in the name of or maintained by

Defendants, either individually, jointly, or in any other
capacity, including safe deposit boxes titled in the name
of or maintained by nominees of Defendants; or
ii.

otherwise subject to the control of or

access by Defendants; and
C.

cooperate with all reasonable requests of the

Commission relating to implementation of this order,
including

producing

records

related

to

Defendants’

accounts and businesses.
It is further ORDERED that, pending further order of
the court, any bank, financial or brokerage institution,
futures commission merchant, forex dealer, entity, or
person that holds, controls, or maintains custody of (or

11

has held, controlled, or maintained custody of at any
time since February 1, 2008) any account or asset titled
in the name of Defendants, either individually, jointly,
or in any other capacity, or that is owned, controlled,
managed, or held by, on behalf of, or for the benefit of
Defendants, and who receives notice of this Order by any
means, including email, facsimile, United Parcel Service,
or Federal Express, shall:
A.

provide counsel for the Commission, within five

business days of receiving a copy of this order, a
statement setting forth:

(a) the identification number

of each such account, or the name and description of each
such asset; (b) the balance of each such account, or a
description of the nature and value of such asset, as of
the close of business on the day on which this order is
served, and, if the account or other asset has been
closed or removed, the date closed or removed, the total
funds removed in order to close the account, and the name
of the person or entity to whom such account or other

12

asset was remitted; and (c) the identification of any
safe

deposit

box

that

is

titled

in

the

name

of

Defendants, either individually, jointly, or in any other
capacity, or that is otherwise subject to the control of
or access by Defendants or any other person on behalf of
Defendants; and
B.
the

upon request by the Commission, promptly provide

Commission

documentation

with

copies

pertaining

of

to

all

such

records
account

or
or

other
asset,

including, but not limited to, originals or copies of
account

applications,

account

statements,

signature

cards, checks, drafts, deposit tickets, transfers to and
from the accounts, all other debit and credit instruments
or slips, currency transaction reports, 1099 forms, and
safe deposit box logs.
It is further ORDERED that Defendants shall prepare,
sign, and file with the court, within 15 days of the date
of

entry

of

this

order,

a

complete

and

accurate

accounting of all of Defendants’ assets and liabilities,

13

including all funds Defendants received from and paid to
commodity
connection

pool
with

participants
all

and

persons

in

futures,

commodity

other

options

on

commodity futures, commodity options, security futures
products,
commodity
commodity
forex

and/or

forex

futures,
options,

contracts,

contracts,

options
security

together

on

and

all

purported

commodity

futures,

futures
with

products,

and/or

names,

mailing

the

addresses, email addresses, and telephone numbers of any
such persons, for the period of February 1, 2008, to and
including the date of such accounting.
It is further ORDERED that Defendants shall prepare,
sign, and file with the court, within 15 days of the date
of

entry

of

this

order,

a

complete

and

accurate

accounting of all disbursements made for any purpose
whatsoever of any funds received from commodity pool
participants and other persons in connection with all
commodity
commodity

futures,
options,

options
security

14

on

commodity

futures

futures,

products,

and/or

forex contracts, and all purported commodity futures,
options on commodity futures, commodity options, security
futures products, and/or forex contracts, including, but
not limited to, salaries, commissions, fees, loans, and
other disbursements of money and property of any kind,
for the period of February 1, 2008, to and including the
date of such accounting.
It

is

further

ORDERED

that

Defendants

shall

immediately identify and provide to the Commission an
accounting of all assets and property they currently
maintain outside the United States, including, but not
limited to, all funds on deposit in any bank, financial
or brokerage institution, futures commission merchant,
forex dealer, or entity that are held in the name of
Defendants, either individually, jointly, or in any other
capacity, or that are owned, controlled, managed, or held
by, on behalf of, or for the benefit of Defendants, and
shall repatriate all funds held in such accounts by
paying them to the Clerk of the Court, or as otherwise

15

ordered by the court, for further disposition in this
case.
It is further ORDERED that Defendants shall produce
to the Commission, within 15 days of the date of entry of
this

order,

all

books,

records,

and

other

documents

supporting or underlying the accountings referenced in
the preceding three paragraphs of this order.
It is further ORDERED that, pending further order of
the court, Defendants are stayed from taking any action
to establish or enforce any claim, right, or interest
for, against, on behalf of, or in the name of any of
Defendants, including, but not limited to, the following
actions:
A. commencing, prosecuting, litigating, or enforcing
any suit (except that actions may be filed to toll any
applicable statute of limitations);
B.

accelerating the due date of any obligation or

claimed obligation, enforcing any lien upon, taking or
attempting to take possession of, or retaining possession

16

of property of Defendants or any property claimed by
Defendants, or attempting to foreclose, forfeit, alter,
or terminate any of Defendants’ interests in property,
whether such acts are part of a judicial proceeding or
otherwise;
C. using self-help or executing, issuing, or causing
the

execution

or

issuance

of

any

court

attachment,

subpoena, replevin, execution, or other process for the
purpose of impounding, taking possession of, interfering
with, creating, or enforcing a lien upon any property,
wherever located, owned by or in the possession of any of
Defendants; and
D.

doing any act or thing to interfere with the

exclusive jurisdiction of this court over funds, assets,
or other property of Defendants.
This paragraph does not stay the commencement or
continuation of an action or proceeding by a governmental
unit

to

enforce

such

governmental

regulatory power.

17

unit’s

police

or

It is further ORDERED that copies of this order may
be

served

by

any

means,

including

personal

service,

email, facsimile, United Parcel Service, Federal Express,
or other commercial overnight service, Federal Rule of
Civil Procedure 5, or Articles 2 through 10 of the Hague
Convention,

upon

any

financial

institution

or

other

entity or person that may have possession, custody, or
control of any documents or assets of Defendants, or that
may be subject to any provision of this order.
Patrick

and

Commission,

Nancy
are

Hooper,

hereby

both

specially

employees
appointed

Joseph
of

to

the
serve

process, including of this order and all other papers in
this case.
It is further ORDERED that, pursuant to 7 U.S.C.
§ 13a-1(b), no bond need be posted by the Commission.
It is further ORDERED that Defendants shall serve all
pleadings,
order,

and

correspondence,
other

notices

materials

on

required
the

by

Commission

this
by

delivering a copy to Stephanie Reinhart, Senior Trial

18

Attorney, Division of Enforcement, U.S. Commodity Futures
Trading

Commission,

525

W.

Monroe

St.,

Suite

1100,

Chicago, Illinois, 60661 and/or by filing such pleadings
or other materials electronically with the court.
It is further ORDERED that this order supersedes the
Restraining Order entered by the court on March 7, 2012.
It is further ORDERED that this order shall remain in
full force and effect until further order of this court
upon application, notice, and an opportunity to be heard,
and that this court retains jurisdiction of this matter
for all purposes.
DONE, this the 2nd day of April, 2012.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE