U.S. Commodity Futures Trading Commission v. Autry et al
Filing
14
ORDER granting 11 Motion for Summary Judgment; granting 11 Motion for Permanent Injunction; granting 11 Motion for Sanctions. Defendants are ordered to pay a civil penalty of one thousand dollars. Signed by Judge B. Avant Edenfield on 12/19/2011. (loh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
STATESBORO DIVISION
had developed a trading system called “Fuel
Matrix,” which would trade energy futures
contracts via Globex, an electronic trading
platform. See id.
U.S. COMMODITY FUTURES
TRADING COMMISSION,
In May 2008, Autry opened a
commodity futures trading account in
ACM’s name with MF Global, Inc. (“MF
Global”), a registered clearing futures
commission merchant (“FCM”). See id.
Autry had sole trading authority over the
ACM trading account. See id. Autry
garnered several customers who invested
funds with ACM to trade commodity futures
contracts on their behalf. See id.
Plaintiff,
v.
6: 10-cv-84
JOSEPH L. AUTRY, JR. and
AUTRY CAPITAL MANAGEMENT
LLC f/k/a JOEY AUTRY LLC,
ORDER
I.
INTRODUCTION
Plaintiff U.S. Commodity Futures
Trading Commission (“Plaintiff”) filed the
underlying complaint alleging that
Defendants Joseph L. Autry, Jr. (“Autry”)
and Autry Capital Management LLC f/k/a
Joey Autry LLC (“ACM”) (collectively,
“Defendants”) defrauded customers by
issuing false statements and
misappropriating customer funds in
violation of Sections 4b(a)(1)(A), (B), and
(C) of the Commodity Exchange Act, as
amended by the CFTC Reauthorization Act
of 2008 (“CRA”), to be codified at 7 U.S.C.
§§ 6b(a)(1)(A), (B), (C) and Section 4o(1)
of the Act, 7 U.S.C. § 6o(1) (2006). See
Doc. 1. Now before the Court is Plaintiff’s
“Motion for Summary Judgment.” See Doc.
11.
II.
BACKGROUND
In 2008, Autry began soliciting
customers to trade commodity futures
contracts through ACM, a limited liability
company he had formed. See Doc. 11-2 at
2. Autry told prospective customers that he
Autry deposited the ACM customer
funds into a bank account that he
maintained, under the name of “Joseph L.
Autry, Jr. d/b/a Joey Autry LCC” (the
former name of ACM) with Farmers and
Merchants Bank (“F&M Bank”) in
Statesboro, Georgia. See id. Autry was the
sole signatory on the F&M Bank account
and had exclusive control over the ACM
customers’ funds. See id.
ACM customer funds were transferred
from the F&M Bank account to ACM’s
trading account at MF Global for trading.
See id. at 3. Periodically, Autry transferred
customer funds from the ACM trading
account to the F&M Bank account, from
which he issued checks to pay himself
performance fees and to pay his personal
debts and expenses. See id.
Throughout the period of May 2008
through January 2010, the ACM trading
account suffered consistent trading losses.
See id. at 4.
To conceal his misappropriation, Autry
prepared and sent false statements to ACM’s
customers via email misrepresenting that
they were earning profits each month, when
in fact Autry’s actual trading resulted in net
losses every month. See id. The statements
showed the customer’s month-end balance
and profit supposedly earned, but did not
show any buy or sell transactions. See id. at
4.
2010, the balance in ACM’s trading account
was approximately $4,220. See id. at 6.
For example, at the end of July 2009,
Autry issued false statements to two ACM
customers, one who had invested $30,000 in
June 2009 and the other had invested
$25,000 in July 2009. See id. at 4-5. The
statements stated they had made profits with
month-end balances of $31,880 and
$25,825, for a total of $57,705. See id. at 5.
In reality, at the end of July the ACM
trading account contained only $16,670. See
Customers would place money
with Mr. Autry for energy futures
trading. Seven customers placed
$265,200. They were told by
contract that they would receive any
profits less the management fee, and
performance bonus that would go to
Mr. Autry from any profits.
Autry admitted the following at his
sentencing hearing:
Mr. Autry generated account
statements for the investors which
indicated trading profits when in fact
there were losses. The false account
statements showed profits sufficient
for Mr. Autry to collect management
fees and performance fees even
though there were no profits, but
instead losses.
id.
Then, at the end of August 2009, Autry
issued additional false statements to the
same two customers stating that they had
made profits with month-end balances of
$32,820 and $26,720, for a total of $58,540.
See id. In reality, the ACM trading account
had a month-end balance of only $21.93.
See id.
See id.
Investors were paid purported
profits out of other investors’ funds.
Because there were no actual profits,
Mr. Autry’s draws were from
investors’ principal funds.
Mr.
Autry’s continuation of the
provisional false accounts [sic]
statements lulled investors, and
allowed the recruiting of additional
investors whose funds were similarly
misused.
At the end of October 2009, Autry
issued false statements to four ACM
customers stating that they had made profits
with month-end balances of $34,440,
$28,400, $62,780 and $30,200, for a total of
$155,820. See id.
Late coming investors’ funds
were used to pay fraudulent returns
to early investors in what is
popularly, though somewhat
inaccurately, described as a Ponzi
scheme.
At the end of September 2009, Autry
sent false statements to another ACM
customer who had invested $60,000 in that
month and to two other customers stating
that they had made profits with month-end
balances of $33,800, $27,700, and $61,700,
for a total of $123,200. See id. In reality, in
September 2009, the ACM trading account
had a month-end balance of only $21,605.
Autry stopped providing account
statements to customers around January
2010. See id. ACM’s customers demanded
the return of their money, and Autry did not
respond. See id. By the end of January
Doc. 11-10 at 10-11.
Autry operated ACM from May 2008
until January 2010. See Doc. 11-5 at 3. As
the president and sole manager and
employee of ACM, he acted as a commodity
2
pool operator by soliciting, accepting and
receiving ACM customer funds that were
pooled for the purpose of trading onexchange commodity futures contracts. See
Doc. 11-2 at 7. Autry’s actions and
inactions fell within the scope of his
employment with ACM. See id.
answers to interrogatories, and admissions
on file, together with the affidavits, if any,
which it believes demonstrate the absence of
a genuine issue of material fact.’” Four
Parcels, 941 F.2d at 1437 (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
On September 15, 2010, the Government
indicted Autry, charging him with fourteen
counts of wire fraud and one count of
commodities fraud. United States v. Autry,
6:10-cr-22, Doc. 1. On February 1, 2011,
Autry, in a sentencing hearing before the
Court, pled guilty to count six, wire fraud, in
violation of 18 U.S.C. § 1343, of his
indictment. See id., Doc. 26. On July 21,
2011, the Court sentenced Autry to twentyseven months in prison and ordered him to
pay $155,200 in restitution. See id., Doc.
32.
The nonmoving party then “may not rest
upon the mere allegations or denials of [his]
pleadings, but must set forth specific facts
showing that there is a genuine issue for
trial.” Gonzalez v. Lee Cnty. Hous. Auth.,
161 F.3d 1290, 1294 (11th Cir. 1998). “A
factual dispute is genuine ‘if the evidence is
such that a reasonable jury could return a
verdict for the nonmoving party.’” Four
Parcels, 941 F.2d at 1437 (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). A fact is material only if
it might affect the outcome of the suit under
governing law. See Anderson, 477 U.S. at
248.
III. MOTION FOR SUMMARY
JUDGMENT
A. Standard of Review
B. Analysis
“The court shall grant summary
judgment if the movant shows that there is
no genuine dispute as to any material fact
and the movant is entitled to judgment as a
matter of law.” F ED. R. C IV. P. 56(a). In
ruling on summary judgment, the Court
views the facts and inferences from the
record in the light most favorable to the nonmoving party. See Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986); United States v. Four Parcels of
Real Prop. in Greene and Tuscaloosa
Cntys., 941 F.2d 1428, 1437 (11th Cir.
1991).
Plaintiff first argues that Defendants
violated “Sections 4b(a)(1)(A), (B), and (C)
of the Act, as amended by the CRA, to be
codified at 7 U.S.C. §§ 6b(a)(1)(A),
(B),(C).” See Doc. 11-1 at 15. Plaintiff
argues that based on Defendants’ admissions
in their answer and Autry’s admissions at
his sentencing hearing, it is undisputed that
Defendants knowingly and intentionally
misappropriated ACM customer funds and
issued false account statements to ACM
customers, in violation of the referenced
anti-fraud statutory provisions. See Doc. 111 at 15.
“The moving party bears ‘the initial
responsibility of informing the . . . court of
the basis for its motion, and identifying
those portions of the pleadings, depositions,
7 U.S.C. § 6b(a)(1)(A)-(C) provides:
It shall be unlawful for any person,
in or in connection with any order to
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participant; or to engage in any
transaction, practice, or course of
business which operates as a fraud or
deceit upon any client or participant
or prospective client or participant.
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 any other person . . . to
cheat or defraud or attempt to cheat
or defraud the other person; willfully
to make or cause to be made to the
other person any false report or
statement or willfully to enter or
cause to be entered for the other
person any false record; [and]
willfully to deceive or attempt to
deceive the other person by any
means whatsoever in regard to any
order or contract or the disposition or
execution of any order or contract, or
in regard to any act of agency
performed, with respect to any order
or contract for . . . the other person . .
..
Plaintiff also avers that, pursuant to
“Section 2(a)(1)(B) of the Act, 7 U.S.C. §
2(a)(1)(B) (2006),” ACM is liable for the
fraudulent acts, omissions and failures of
Autry because Defendants have admitted
that Autry’s actions occurred within the
scope of his employment with ACM. See
Doc. 11-1 at 17.
7 U.S.C. § 2(a)(1)(B) provides that:
The act, omission, or failure of
any official, agent, or other person
acting for any individual,
association, partnership, corporation,
or trust within the scope of his
employment or office shall be
deemed the act, omission, or failure
of such individual, association,
partnership, corporation, or trust, as
well as of such official, agent, or
other person.
Plaintiff also argues that Defendants
violated “Section 4o(1) of the Act, 7 U.S.C.
§ 6o(1) (2006).” See Doc. 11-1 at 16.
Plaintiff avers that it is undisputed that
Autry admitted that while acting as a
commodity pool operator (“CPO”) he
knowingly and intentionally
misappropriated customer funds and issued
false account statements to ACM customers.
See id. at 17.
In their response, Defendants do not
contest the allegations that they violated 7
U.S.C. § 6b(a)(1)(A)-(C) and 7 U.S.C. §
6o(1)(A)-(B). See Doc. 13 at 1-5. (“The
Defendant has never denied the facts that
have been set out in the Motion for
Summary Judgment by the Commodities
Futures Trading Commission.”). Therefore,
based on the undisputed facts, the Court
concludes, as a matter of law, that Autry
violated 7 U.S.C. § 6b(a)(1)(A)-(C) and 7
U.S.C. § 6o(1)(A)-(B), alleged in Counts
One and Two of Plaintiff’s complaint, and
because Autry was acting within the scope
7 U.S.C. § 6o(1)(A)-(B) provides:
It shall be unlawful for a . . .
commodity pool operator . . . to
employ any device, scheme, or
artifice to defraud any client or
participant or prospective client or
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systematic wrongdoing, rather than an
isolated occurrence, a court should be more
willing to enjoin future misconduct.” Id.
of his employment, ACM is likewise liable
for such violations. The only contested
issue is the nature of relief to be granted or
imposed.
Plaintiff seeks a permanent injunction
prohibiting Defendants, and any of their
agents, servants, employees, assigns,
attorneys, and persons in active concert or
participation with any Defendant, including
any successor thereof, from engaging,
directly or indirectly:
First, Plaintiff seeks permanent
injunctive relief pursuant to 7 U.S.C. § 13a1, which provides that “[uJpon a proper
showing, a permanent . . . injunction . . .
shall be granted without bond.” See id. §
13a-1(b) (emphasis added).
“Actions for statutory injunctions need
not meet the requirements for an injunction
imposed by traditional equity jurisprudence.
Once a violation is demonstrated, the
moving party need show only that there is
some reasonable likelihood of future
violations.” Commodity Futures Trading
Comm’n v. Hunt, 591 F.2d 1211, 1220 (7th
Cir. 1979); see also SEC v. Ginsburg, 362
F.3d 1292, 1304 (11th Cir. 2004).
a) in conduct in violation of
Sections 4b(a)( 1 )(A), (B) and (C)
of the Act to be codified at 7
U.S.C. §§ 6b(a)(1)(A), (B) and
(C) (2006), and 4o(1) of the Act,
7 U.S.C. § 6o(1) (2006);
b) trading on or subject to the rules
of any registered entity (as that
term is defined in Section 1a(29)
of the Act, 7 U.S.C. § 1a(29)
(2006);
c) entering into any transactions
involving commodity futures,
options on commodity futures,
commodity options (as that term
is defined in Regulation
32.1(b)(1), 17 C.F.R. §
32.1(b)(1) (2010) (“commodity
options”), and/or foreign
currency (as described in
Sections 2(c)(2)(B) and
2(c)(2)(C)(i) of the Act, as
amended by the CRA, to be
codified at 7 U.S.C. §§
2(c)(2)(B) and 2(c)(2)(C)(i))
(“forex contracts”) for any
personal or proprietary account
or for any account in which they
have a direct or indirect interest;
“The factors to be considered are ‘the
egregiousness of the defendant’s actions, the
isolated or recurrent nature of the infraction,
the degree of scienter involved, the sincerity
of the defendant’s assurances against future
violations, the defendant’s recognition of the
wrongful nature of his conduct, and the
likelihood that the defendant’s occupation
will present opportunities for future
violations.’” Commodity Futures Trading
Comm ’n v. Risk Capital Trading Grp., Inc.,
452 F. Supp. 2d. 1229, 1247 (N.D. Ga.
2006) (quoting Ginsburg, 362 F.3d at 1304).
“While past misconduct does not lead
necessarily to the conclusion that there is a
likelihood of future misconduct, it is ‘highly
suggestive of the likelihood of future
violations.’” Hunt, 591 F.2d at 1220.
“When the violation has been founded on
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d) having any commodity futures,
options on commodity futures,
commodity options, and/or forex
contracts traded on their behalf;
e) 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 futures,
options on commodity futures,
commodity options, and/or forex
contracts;
f) 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, and/or forex
contracts;
g) 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 Regulation 4.14(a)(9), 17
C.F.R. § 4.14 (a)(9) (2010); and
h) acting as a principal (as that term
is defined in Regulation 3.1(a),
17 C.F.R. § 3.1(a)(2010)), agent
or any other officer or employee
of any person (as that term is
defined in Section 1a(28) of the
Act, 7 U.S.C. § 1a(28) (2006))
registered,
exempted
from
registration or required to be
registered with the Commission,
except as provided for in
Regulation 4.14(a)(9), 17 C.F.R.
§ 4.14(a)(9) (2010).
Doc. 11-1 at 21-22. It is undisputed that
Defendants knowingly committed fraud for
more than one year. Because of the
knowing and willful violations and their
recurrent nature, the Court concludes that
Plaintiff has made a sufficient showing to
justify a “reasonable likelihood of future
Hunt, 591 F.2d at 1220.
violations.”
Moreover, although Defendants aver that
they have no intent of returning to
commodities trading, Defendants have “no
objection to the entry of a permanent
injunction” and ask that the Court “enter the
permanent injunction as requested by the
Plaintiffs.” See Doc. 13 at 2, 4.
Accordingly, the Court GRANTS the
permanent injunction as outlined supra in
sections (a) through (h). See Commodity
Futures Trading Comm ’n v. Wilshire Inv.
Mgmt. Corp., 531 F.3d 1339, 1347 n.5 (11th
Cir.
2008)
(“[I]njunctions
broadly
prohibiting ‘commodity-related activity’
have been found to be within a district
court’s authority.”).
In addition, Plaintiff seeks the
imposition of a civil monetary penalty. See
Doc. 11-1 at 22. Plaintiff argues that the
imposition of a penalty as “to each ACM
customer they have admitted to have
warranted
defrauded”
is
because
Defendants’ “conduct was intentional and
they personally benefited from their
fraudulent conduct.” See id. In response,
Defendants ask that the Court not impose a
penalty or only impose a nominal penalty.
See Doc. 13 at 4. Defendants aver that
6
Autry has been punished sufficiently as he
has been sentenced to twenty-seven months
in prison and ordered to pay $155,200 in
restitution. See id. at 3. In addition,
Defendants aver that the burden of a penalty
upon Autry would be financially onerous
and potentially ruinous, and he has been
punished sufficiently without the imposition
of a penalty. See id.
Trading Comm’n v. Levy, 541 F.3d 1102,
1112 (11th Cir. 2008). In applying this
standard, it is appropriate to take into
account “the general seriousness of the
violation[s] as well as any particular
mitigating or aggravating circumstances that
exist.” Wilshire, 531 F.3d at 1346. Factors
that may be considered include: “(1) the
relationship of the violation at issue to the
regulatory purposes of the Act; (2) [the
defendant]’ s state of mind; (3) the
consequences flowing from the violative
conduct; and (4) [the defendant]’s postviolation conduct.” R & W Technical Servs.
Ltd. v. Commodity Futures Trading
Comm’n, 205 F.3d 165, 177 (5th Cir. 2000).
7 U.S.C. § 13a-1(d)(1) provides:
In any action brought under this
section, the Commission may seek
and the court shall have jurisdiction
to impose, on a proper showing, on
any person found in the action to
have committed any violation . . . a
civil penalty in the amount of not
more than the greater of $100,000 or
triple the monetary gain to the person
for each violation . . . .
“[D]efrauding customers should be
considered very serious.” JCC, Inc. v.
Commodity Futures Trading Comm ’n, 63
F.3d 1557, 1571 (11th Cir. 1995) (internal
quotation omitted). It is undisputed that
Autry knowingly and repeatedly deceived
his customers. Therefore, the imposition of
a monetary penalty is warranted.
Specifically, 17 C.F.R. §
143.8(a)(1)(iii)-(iv) permits the Court to
impose civil monetary penalties for
violations committed by Defendants before
October 22, 2008 of not more than the
greater of $130,000 or triple the monetary
gain to Defendants for each violation and for
violations after such date, not more than the
greater of $140,000 or triple the monetary
gain to Defendants for each violation.
“[B]ecause the remedy is punitive, it
also should be carefully measured. The
penalty should be sufficient but not harsher
than necessary to meet the goals of
relatedness, proportionality, and deterrence.”
Capital Blu Mgmt., 2011 WL 2357629, at
*11. The Court is “cognizant of its duty to
be realistic and not set a figure which is
impossible for [Autry] to comply with due
to lack of monetary resources.” Commodity
Futures Trading Comm ’n v. Heffernan, 274
F. Supp. 2d 1375, 1378 (S.D. Ga. 2003).
“A district court is not obligated to
impose the maximum monetary penalty
available under the Act.” Commodity
Futures Trading Comm ’n v. Capital Blu
Mgmt., LLC, 2011 WL 2357629, at *7
(M.D. Fla. June 9, 2011).
After a consideration of the record, the
Court ORDERS Defendants to pay a one
thousand ($1,000) dollar penalty.
In
The penalty must be “rationally related
to the offense charged or the need for
deterrence.”
See Commodity Futures
7
calculating this amount, this Court is
mindful that it has previously ordered
Defendants to pay restitution to the victims
of their fraud, that Autry has been sentenced
to twenty-seven months in prison, and that
Autry averred that he currently has limited
financial resources.
IV. CONCLUSION
Plaintiff’s “Motion for Summary
Judgment,” see Doc. 11, is GRANTED.
Plaintiff’s request for a permanent
injunction is GRANTED.
Defendants are ORDERED to pay a
civil penalty of one thousand ($1,000)
dollars.
This 19th day of December 2011.
I)
B_ AVANT EDENFIELØ, JUDGE
AVANT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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