United States Commodity Futures Trading Commission v. Paron Capital Management, LLC et al

Filing 273

JUDGMENT AND ORDER GRANTING PLAINTIFF CFTCS 268 MOTION FOR PERMANENT INJUNCTION,RESTITUTION, AND IMPOSITION OF CIVIL MONETARY PENALTIES AGAINST DEFENDANT JAMES D.CROMBIE***Civil Case Terminated.*** Signed by Judge Claudia Wilken on 11/21/2013. (ndr, COURT STAFF) (Filed on 11/21/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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UNITED STATES COMMODITY FUTURES
TRADING COMMISSION,
Plaintiff,

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United States District Court
For the Northern District of California

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v.
JAMES D. CROMBIE,
Defendants.
________________________________/

No. C 11-04577 CW
JUDGMENT AND ORDER
GRANTING PLAINTIFF
CFTC’S MOTION FOR
PERMANENT
INJUNCTION,
RESTITUTION, AND
IMPOSITION OF
CIVIL MONETARY
PENALTIES AGAINST
DEFENDANT JAMES D.
CROMBIE

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On July 26, 2013, the Court granted the motion of Plaintiff
United States Commodity Futures Trading Commission (CFTC) for
summary judgment on each count in the CFTC’s Amended Complaint.
(Dkt. No. 267.)

The Court also denied Defendant James D.

Crombie’s cross-motion for summary judgment and his motion for
leave to file new claims.

Id.

The Court instructed the CFTC to file a motion addressing the
relief it seeks.

The CFTC now moves the Court for an order

permanently enjoining Crombie from participating in markets
regulated by the CFTC and requiring him to pay restitution and a
civil monetary penalty.

Having considered the papers submitted by

the parties, the Court GRANTS the CFTC’s motion.
ORDERED and ADJUDGED as follows:

It is therefore

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I.

JUDGMENT

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1.

Consistent with the findings of fact and conclusions of

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law set forth in the Court’s July 26, 2013 Order, the Court hereby

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enters the following judgment:
a.

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Crombie violated Section 9(a)(4) of the Commodity

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Exchange Act (the Act), 7 U.S.C. § 13(a)(4)(2012), by

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willfully misrepresenting to the National Futures Association

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(NFA) information regarding Crombie’s financial performance

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history and loans Crombie had received from individuals; and
b.

United States District Court
For the Northern District of California

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Crombie violated Sections 4b(a)(1)(A), (B) and

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4o(1)(A), (B) of the Act, 7 of the Act, 7 U.S.C. §§

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6b(a)(1)(A), (B); 6o(1) (A), (B) (2012), by willfully making

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misrepresentations and omissions to prospective customers of

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Paron Capital Management, LLC (Paron).

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2.

As a result of these violations of the Act, and as set

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forth in more detail below, the Court orders that Crombie is

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permanently enjoined from further violations of the Act and from

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future participation in the markets regulated by the CFTC.

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3.

As a result of these violations of the Act, and as set

forth in more detail below, Crombie shall pay:
a.

Restitution in the amount of seven hundred forty-

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six thousand, four hundred sixty dollars and twenty-eight

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cents ($746,460.28) plus pre-judgment interest in the amount

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of forty-three thousand eighty dollars and nineteen cents

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($43,080.19), plus any post-judgment interest as determined

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by statute; and

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b.

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A civil monetary penalty in the amount of seven

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hundred fifty thousand dollars ($750,000), plus any post-

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judgment interest as determined by statute.

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II.

PERMANENT INJUNCTION

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4.

Pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1

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(2012), Crombie is permanently restrained, enjoined and prohibited

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from directly or indirectly:
a.

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violation of Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4)

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United States District Court
For the Northern District of California

Engaging, directly or indirectly, in any conduct in

(2012);

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b.

Engaging, directly or indirectly, in any conduct in

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violation of Sections 4b(a)(1)(A), (B) of the Act, 7 U.S.C.

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§§ 6b(a)(1)(A), (B) (2012); or
c.

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Engaging, directly or indirectly, in any conduct in

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violation of Sections 4o(1)(A), (B) of the Act, 7 U.S.C. §§

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6o(1) (A), (B) (2012).

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5.

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Crombie is also permanently restrained, enjoined and

prohibited from directly or indirectly:
a.

Trading on or subject to the rules of any

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registered entity (as that term is defined in Section 1a of

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the Act, 7 U.S.C. § 1a (2012));

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b.

Entering into any transactions involving commodity

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futures, options on commodity futures, commodity options (as

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that term is defined in Regulation 1.3 (hh), 17 C.F.R. §

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1.3(hh) (2011)), security futures products, swaps (as that

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term is defined in Section 1a(47) of the Act, 7 U.S.C. §

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1a(47), and as further defined by Regulation 1.3(xxx), 17

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C.F.R. § 1.3(xxx)), and/or foreign currency (as described in
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Sections 2(c)(2)(B) and 2(c)(2)(C)(i) of the Act, 7 U.S.C. §§

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2(c)(2)(B) and 2(c)(2)(C)(i) (2012)) (forex contracts) for

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his own personal account or for any account in which he has a

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direct or indirect interest;

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c.

Having any commodity futures, options on commodity

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futures, commodity options, security futures products, swaps,

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and/or forex contracts traded on his behalf;

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d.

Controlling or directing the trading for or on

behalf of any other person or entity, whether by power of

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United States District Court
For the Northern District of California

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attorney or otherwise, in any account involving commodity

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futures, options on commodity futures, commodity options,

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security futures products, swaps, and/or forex contracts;

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e.

Soliciting, receiving or accepting any funds from

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any person for the purpose of purchasing or selling any

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commodity futures, options on commodity futures, commodity

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options, security futures products, swaps and/or forex

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contracts;

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f.

Applying for registration or claiming exemption

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from registration with the Commission in any capacity, and

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engaging in any activity requiring such registration or

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exemption from registration with the Commission, except as

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provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9)

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(2012); and/or

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g.

Acting as a principal (as that term is defined in

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Regulation 3.1(a), 17 C.F.R. § 3.1(a) (2012)), agent or any

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other officer or employee of any person (as that term is

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defined in Section 1a of the Act, 7 U.S.C. § 1a (2012))

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registered, exempted from registration or required to be
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registered with the Commission except as provided for in

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Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2012).

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III. RESTITUTION

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6.

Crombie shall pay restitution in the amount of seven

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hundred forty-six thousand, four hundred sixty dollars and twenty-

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eight cents ($746,460.28) plus pre-judgment interest in the amount

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of forty-three thousand eighty dollars and nineteen cents

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($43,080.19) (collectively, the Restitution Obligation), plus

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post-judgment interest, within ten (10) days of the date of the

United States District Court
For the Northern District of California

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entry of this Order.

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Restitution Obligation beginning on the date of entry of this

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Order and shall be determined by using the Treasury Bill rate

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prevailing on the date of entry of this Order, pursuant to 28

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U.S.C. § 1961.

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7.

Post-judgment interest shall accrue on the

To effect payment of the Restitution Obligation and the

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distribution of any restitution payments to Crombie’s and/or

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Paron’s customers or clients, the Court appoints the National

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Futures Association (NFA) as Monitor.

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restitution payments from Crombie and make distributions as set

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forth below.

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Court in performing these services, NFA shall not be liable for

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any action or inaction arising from NFA’s appointment as Monitor,

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other than actions involving fraud.

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8.

The Monitor shall collect

Because the Monitor is acting as an officer of this

Crombie shall make Restitution Obligation payments under

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this Order to the Monitor in the name “Crombie – Restitution Fund”

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and shall send such Restitution Obligation payments by electronic

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funds transfer, or by U.S. postal money order, certified check,

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bank cashier’s check, or bank money order, to the Office of
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Administration, National Futures Association, 300 South Riverside

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Plaza, Suite 1800, Chicago, Illinois 60606, under a cover letter

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that identifies the paying Defendant and the name and docket

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number of this proceeding.

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copies of the cover letter and the form of payment to the Chief

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Financial Officer, Commodity Futures Trading Commission, Three

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Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581.

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9.

Crombie shall simultaneously transmit

The Monitor shall oversee the Restitution Obligation and

shall have the discretion to determine the manner of distribution

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United States District Court
For the Northern District of California

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of such funds in an equitable fashion to Crombie’s and/or Paron’s

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customers or clients identified by the CFTC or may defer

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distribution until such time as the Monitor deems appropriate.

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the event that the amount of Restitution Obligation payments to

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the Monitor are of a de minimis nature such that the Monitor

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determines that the administrative cost of making a distribution

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to eligible customers or clients is impractical, the Monitor may,

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in its discretion, treat such restitution payments as civil

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monetary penalty payments, which the Monitor shall forward to the

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CFTC following the instructions for civil monetary penalty

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payments set forth in Part III below.

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10.

In

Crombie shall cooperate with the Monitor as appropriate

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to provide such information as the Monitor deems necessary and

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appropriate to identify Crombie’s and/or Paron’s customers or

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clients whom the Monitor, in its sole discretion, may determine to

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include in any plan for distribution of any Restitution Obligation

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payments.

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release funds that he has in any repository, bank, investment or

Crombie shall execute any documents necessary to

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other financial institution, wherever located, in order to make

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partial or total payment toward the Restitution Obligation.

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11.

The Monitor shall provide the Commission at the

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beginning of each calendar year with a report detailing the

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disbursement of funds to Crombie’s and/or Paron’s customers or

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clients during the previous year.

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report under a cover letter that identifies the name and docket

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number of this proceeding to the Chief Financial Officer,

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Commodity Futures Trading Commission, Three Lafayette Centre, 1155

United States District Court
For the Northern District of California

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The Monitor shall transmit this

21st Street, NW, Washington, D.C. 20581.
12.

The amounts payable to each customer or client shall not

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limit the ability of any customer or client from proving that a

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greater amount is owed from Crombie or any other person or entity,

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and nothing herein shall be construed in any way to limit or

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abridge the rights of any customer or client that exist under

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state or common law.

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13.

Pursuant to Rule 71 of the Federal Rules of Civil

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Procedure, each customer or client of Crombie and/or Paron who

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suffered a loss is explicitly made an intended beneficiary of this

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Order and may seek to enforce obedience of this Order to obtain

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satisfaction of any portion of the restitution that has not been

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paid by Crombie.

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14.

To the extent that any funds accrue to the U.S. Treasury

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for satisfaction of Crombie’s Restitution Obligation, such funds

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shall be transferred to the Monitor for disbursement in accordance

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with the procedures set forth above.

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IV.

CIVIL MONETARY PENALTY

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Crombie shall pay a civil monetary penalty in the amount

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of seven hundred fifty thousand dollars ($750,000.00) (CMP

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Obligation), plus post-judgment interest, within ten (10) days of

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the date of the entry of this Order.

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accrue on the CMP Obligation beginning on the date of entry of
this Order and shall be determined by using the Treasury Bill rate
prevailing on the date of entry of this Order, pursuant to 28

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United States District Court
For the Northern District of California

Post-judgment interest shall

U.S.C. § 1961.

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16.

Crombie shall pay his CMP Obligation by electronic funds

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transfer, U.S. postal money order, certified check, bank cashier’s

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check, or bank money order.

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by electronic funds transfer, then the payment shall be made

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If payment is to be made other than

payable to the Commodity Futures Trading Commission and sent to

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the address below:
Commodity Futures Trading Commission
Division of Enforcement
ATTN: Accounts Receivables – AMZ 340
E-mail Box: 9-AMC-AMZ-AR-CFTC DOT/FAA/MMAC
6500 S. MacArthur Blvd.
Oklahoma City, OK 73169
Telephone: [phone]

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If payment by electronic funds transfer is chosen, Crombie
shall contact Linda Zurhorst or her successor at the address above
to receive payment instructions and shall fully comply with those
instructions.

Crombie shall accompany payment of the CMP

Obligation with a cover letter that identifies Crombie and the
name and docket number of this proceeding.
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Crombie shall

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simultaneously transmit copies of the cover letter and the form of

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payment to the Chief Financial Officer, Commodity Futures Trading

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Commission, Three Lafayette Centre, 1155 21st Street, NW,

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Washington, DC 20581.

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V.

MISCELLANEOUS PROVISIONS

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All notices required to be given by any provision in

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this Order shall be sent certified mail, return receipt requested,

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as follows:

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United States District Court
For the Northern District of California

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Notice to CFTC:

Director, Division of Enforcement
Three Lafayette Centre
1121 21st Street NW
Washington, DC 20581

Notice to Crombie:

James D. Crombie
P.O. Box 2140
Merrifield, VA 22116
[e-mail]

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All such notices to the CFTC shall reference the name and
docket number of this action.
18.

Until such time as Crombie satisfies in full his

Restitution Obligation and CMP Obligation as set forth in this
Order, Crombie shall provide written notice to the Commission by
certified mail of any change to his telephone number and mailing
address within ten (10) calendar days of the change.
19.

This Court shall retain jurisdiction of this action in

order to implement and carry out the terms of all orders and
decrees, including orders setting the appropriate amounts of
restitution and civil monetary penalty, that may be entered
herein, to entertain any suitable application or motion for
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additional relief within the jurisdiction of the Court, to assure

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compliance with this Order and for any other purpose relevant to

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this action.

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20.

The injunctive and equitable relief provisions of this

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Order shall be binding upon Crombie, upon any person under his

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authority or control, and upon any person who receives actual

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notice of this Order, by personal service, e-mail, facsimile or

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otherwise insofar as he or she is acting in active concert or

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participation with Crombie.

United States District Court
For the Northern District of California

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IT IS SO ORDERED AND ADJUDGED.

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Dated: 11/21/2013
CLAUDIA WILKEN
United States District Judge

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