U.S. COMMODITY FUTURES TRADING COMMISSION v. HALL

Filing 42

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE L. PATRICK AULD signed on 11/21/2013, recommending that Plaintiff's Motion for Summary Judgment Against Defendant Neal E. Hall (Docket Entry 37 ) be granted. Futher recommending that the Court enter a permanent injunction prohibiting Defendant and any of his agents, servants, employees, assigns, attorneys, and persons in active concern or participation with the Defendant, including any successor thereof, from engaging, directly or indirectly, in any conduct or activity as set out herein. Further recommending that the Court assess a civil monetary penalty against Defendant in the amount of $210,000. (Daniel, J)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

U.S. COMMODITY FUTURES TRADING
COMMISSION,
Plaintiff,
v.
NEAL E. HALL, d/b/a
SHOWMEMYFUTURE.COM,
Defendant.

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1:11CV434

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
The instant matter comes before the undersigned United States
Magistrate Judge for a recommended ruling on Plaintiff’s Motion for
Summary Judgment Against Defendant Neal E. Hall (Docket Entry 37).
(See Docket Entry dated July 13, 2012.)

For the reasons that

follow, the instant Motion should be granted.
I.
Plaintiff,
Commission

the

(“CFTC”),

BACKGROUND

United
brought

States
this

Commodity
action

Futures

against

Trading

Defendant,

proceeding pro se, for violations of: (1) Section 4m(1) of the
Commodity Exchange Act (the “Act”), 7 U.S.C. § 6m(1), for failure
to register as a commodity trading advisor (“CTA”) (Docket Entry 1,
¶¶

29-33);

(2)

Commission

Regulation

4.41(a)(3),

17

C.F.R.

§ 4.41(a)(3), for failure to provide the required cautionary
statements concerning client testimonials (Docket Entry 1, ¶¶ 34-

38);

and

(3)

4.41(b)(1),
statement

Commission

for

failure

regarding

Regulation
to

4.41(b)(1),

provide

limitations

of

the

17

required

simulated

or

C.F.R.

§

cautionary
hypothetical

trading results (Docket Entry 1, ¶¶ 39-42).1
The

unrebutted

evidence

before

the

Court2

reveals

the

following:
(1)

“during

the

continued

relevant

to

write

period,

the

[Defendant]

[content]

for

wrote

the

and

website,

www.showmemyfuture.com [(the ‘Website’)]” (Docket Entry
38-1 at 79-80);
(2)

“the [Website] advertises [Defendant’s] trading system
for E-mini S&P’s 500 Futures contracts” (id. at 80);

(3)

“during the relevant period, in exchange for payment of
a

monthly

fee,

[Defendant]

advised

[his]

.

.

.

subscribers, via e-mail[,] as to when they should open

1

Congress gave the Commission the ability “to make and
promulgate such rules and regulations as, in the judgment of the
Commission, are reasonably necessary to effectuate any of the
provisions or the accomplish any of the purposes of th[e] [Act].”
7 U.S.C. 12a(5).
2

On January 19, 2012, the undersigned held a hearing, in
part, to address Defendant’s failure to respond to Plaintiff’s
Requests for Admission. (See Docket Entry dated Jan. 19, 2012; see
also Docket Entry 38-1.) With the consent of both Parties (see
Docket Entry 38-1 at 77-78), the undersigned read each of
Plaintiff’s Requests for Admission in open Court (with the
exception of the seventh Request for Admission which required
referencing several exhibits not readily accessible (id. at 81-82,
87)) and Defendant responded with admissions (id. at 79-87).
-2-

and

close

positions

in

E-mini

of

2010

S&P’s

500

Futures

Contracts” (id.);
(4)

“from

at

least

June

until

May

31,

2010,

[Defendant] plac[ed] trades in some of [his] client[s’]
trading accounts” (id.);
(5)

“from at least June of 2010 until May 31, 2011, some of
[Defendant’s] clients paid [him] via Pay Pal to place
trades in their trading accounts” (id. at 81);

(6)

“[Defendant] continued to place trades in some of [his]
client[s’] trading accounts in exchange for payment via
Pay Pal, even after [his] power of attorney over those
accounts had been revoked” (id.);

(7)

“during the relevant time period, [the Website] contained
the statement, ‘Our members have historically doubled
their money in less than 12 months’” (id. at 82-83);

(8)

“at different times during the relevant time period, [the
Website] contained the following statements: A, ‘You can
view information about a managed account that we can
trade for you’ . . . [and] B, ‘You can view information
about an auto trade account that we can trade for you’”
(id. at 83);

(9)

“during the relevant time period, including from at least
June of 2010 until May 31, 2011, [the Website] did not
have

the

following

specific

-3-

cautionary

language,

verbatim[:] ‘These results are based on simulated or
hypothetical

performance

inherent limitations.

results

that

have

certain

Unlike the results shown in an

actual performance record, these results do not represent
actual trading.

Also, because these trades have not

actually been executed, these results may have under or
over compensated for the impact, if any, of certain
market factors, such as lack of liquidity.
‘Simulated or hypothetical trading programs in general
are also subject to the fact that they are designed with
the benefit of hindsight.

No representation is being

made that any account will or is likely to achieve
profits or losses similar to those being shown.’” (id. at
84-85);
(10) “during the relevant time period, [the Website] featured
testimonials from clients” (id. at 85);
(11) “from at least June of 2010 until May 31, 2011,[the
Website] did not have a disclaimer stating that the
testimonials may not be representative of the experience
of other clients, and that the testimonials are no
guarantee of future performance or success” (id. at 8586);
(12) “during the relevant period, [the Website] featured, A,
a link to a spreadsheet history chart that contained back

-4-

tested or hypothetical trading results[; and] B, the
following statement; ‘The best percentage accuracy rate
of any existing S&P futures trading program on the
internet guaranteed.’” (id. at 86); and
(13) “during the relevant period, [Defendant has] never been
registered in any capacity with the [CFTC]” (id. at 8687).3
Through the instant Motion, Plaintiff “requests that this
Court (1) enter judgment as a matter of law against Defendant on
all counts of the [] Complaint, (2) enter an order of permanent
injunction, including a trading prohibition, and (3) impose a civil
monetary penalty of $420,000 against [Defendant] and any other
relief the Court deems is necessary or appropriate.” (Docket Entry
37 at 3.)
II.

STANDARD

“The [C]ourt 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.”
P. 56(a).

Fed. R. Civ.

Such a genuine dispute exists if the evidence presented

could lead a reasonable fact-finder to return a verdict in favor of
the non-moving party.

Anderson v. Liberty Lobby, Inc., 477 U.S.

3

Moreover, Sandra A. Jung, a Document Research Supervisor
with the CFTC (Docket Entry 38-3, ¶ 1), avers that she “caused to
be conducted a review of [the] official CFTC [registration] records
from July 1982 to the present” and found that “[t]here is no record
of a registration in any capacity for [Defendant]” (id., ¶¶ 4-5).
-5-

242, 255 (1986). In making this determination, the Court must view
the evidence and any reasonable inferences therefrom in a light
most favorable to the non-moving party.

Matsushita Elec. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see also
Francis v. Booz, Allen & Hamilton, Inc., 452 F.3d 299, 308 (4th
Cir. 2006) (“Mere unsupported speculation is not sufficient to
defeat

a

summary

judgment

motion

if

the

undisputed

evidence

indicates that the other party should win as a matter of law.”).
III.
A.

DISCUSSION

Liability
The unrebutted evidence establishes that, at all relevant

times, Defendant qualified as a CTA under the Act and that his
actions violated 7 U.S.C. § 6m(1), 17 C.F.R. § 4.41(a)(3), and 17
C.F.R. § 4.41(b)(1).

The Act defines a CTA, in relevant part, as

“any person who . . . for compensation or profit, engages in the
business

of

advising

others,

either

directly

or

through

publications, writings, or electronic media, as to the value of or
the advisability of trading in . . . any contract of sale of a
commodity for future delivery . . . .”

7 U.S.C. 1a(12)(A).

It is

undisputed that, during the relevant period, “in exchange for
payment

of

a

monthly

fee,

[Defendant]

advised

[his]

.

.

.

subscribers, via e-mail as to when they should open and close
positions in E-mini S&P’s 500 Futures Contracts” (see Docket Entry
38-1

at

80)

and

that

Defendant’s

-6-

Website

“advertise[d]

[Defendant’s]

trading

contracts” (id.).

system

for

E-mini

S&P’s

500

Futures

Accordingly, regardless of whether or not

Plaintiff considered himself a CTA, he met the definition for
purposes of the Act. See C.F.T.C. v. Heffernan, No. 4:04-23302-25,
2006

WL

2434015,

at

*6

(D.S.C.

2006)

(unpublished)

(finding

defendant met definition of CTA where defendant “provided commodity
futures trading advice for compensation or profit by selling the
trading techniques and electronic mail subscription service [and]
the information provided was designed to advise investors trading
in S&P500 futures contracts”).
Section 6m(1) states in relevant part:
It shall be unlawful for any [CTA] . . ., unless
registered under this chapter, to make use of the mails
or any means or instrumentality of interstate commerce in
connection with his business as such [CTA] . . .
Provided, That the provisions of this section shall not
apply to any commodity trading advisor who, during the
course of the preceding twelve months, has not furnished
commodity trading advice to more than fifteen persons and
who does not hold himself out generally to the public as
a commodity trading advisor . . . .
7 U.S.C. § 6m(1).4
Given that Defendant has admitted his lack of registration as
a CTA with the CFTC (see Docket Entry 38-1 at 86-87), his actions,

4

Despite Defendant’s contentions regarding the vagueness of
the term “holding out” as it appears in the foregoing, cited
language (see Docket Entry 39 at 5, 8-9; see also Docket Entries
22, 34), the unrebutted evidence establishes that Defendant
represented to the public (via the Website) that he took actions
commensurate with a CTA as that term is defined in the Act, thereby
“hold[ing] himself out generally to the public as a [CTA],” 7
U.S.C. § 6m(1).
-7-

including “advis[ing] [his] . . . subscribers, via e-mail as to
when they should open and close positions in E-mini S&P’s 500
Futures Contracts”

(see Docket Entry 38-1 at 80),

violated the

provisions of Section 6m(1). See Heffernan, 2006 WL 2434015, at *7
(finding defendant violated 7 U.S.C. § 6m(1) where “defendant used
the mails, telephone, electronic mail, and the internet while
acting as a . . . CTA”); see also C.F.T.C. v. Prestige Ventures
Corp., No. CIV-09-1284-R, 2010 WL 8355003, at *5 (W.D. Okla. Oct.
27, 2010) (unpublished) (including internet as instrumentality of
interstate commerce); S.E.C. v. Novus Techs., LLC, No. 2:07-CV-235TC, 2010 WL 4180550, at *13 (D. Utah Oct. 20, 2010) (unpublished)
(same).
The unrebutted evidence similarly establishes that Plaintiff
failed to comply with CFTC Regulations 4.41(a)(3) and 4.41(b)(1).
Regulation 4.41(a)(3) states:
(a) No . . . [CTA] . . . may advertise in a manner which:
. . .
(3)

Refers
to
any
testimonial,
unless
the
advertisement or sales literature providing
the testimonial prominently discloses:

(i)

That the testimonial may not be representative
of the experience of other clients;

(ii) That the testimonial is no guarantee of future
performance or success; and
(iii)If, more than a nominal sum is paid, the fact
that it is a paid testimonial.
17 C.F.R. § 4.41(a)(3).
-8-

Regulation 4.41(b)(1) provides:
No person may present the performance of any
simulated or hypothetical commodity interest account,
transaction in a commodity interest or series of
transactions in a commodity interest of a . . . [CTA]
. . . unless such performance is accompanied by one of
the following:
(i)

The following statement: “These results are
based on simulated or hypothetical performance
results
that
have
certain
inherent
limitations. Unlike the results shown in an
actual performance record, these results do
not represent actual trading. Also, because
these trades have not actually been executed,
these results may have under- or overcompensated for the impact, if any, of certain
market factors, such as lack of liquidity.
Simulated or hypothetical trading programs in
general are also subject to the fact that they
are designed with the benefit of hindsight.
No representation is being made that any
account will or is likely to achieve profits
or losses similar to these being shown.”; or

(ii) A statement prescribed pursuant to rules
promulgated
by
a
registered
futures
association pursuant to section 17(j) of the
Act.
17 C.F.R. § 4.41(b)(1).
According to the unrebutted evidence, “during the relevant
time period, [the Website] featured testimonials from clients”
(Docket Entry 38-1 at 85) as well as hypothetical trading results
(id. at 86), but failed to contain the required cautionary language
with respect to either (see id. at 84-86). Defendant contends that
none of the above-cited Rules or Regulations apply to him because
he “was not and never has been required to register as and should
not be considered a CTA according to specific rule and law.”
-9-

(Docket Entry 39 at 1-2; see also id. at 10 (“[D]efendant was not
required to [comply with Regulation 4.41(a)(3)] since he was not a
CTA and was not obligated to follow the rules of a CTA.”); id.
(“[D]efendant

was

not

required

to

[comply

with

Regulation

4.41(b)(1)] since he was not a CTA and was not obligated to follow
the rules of a CTA”).)
In

support

of

this

contention,

Defendant

points

to

the

following language in the Code of Federal Regulations:
(a) A person is not required to register under the
Act as a [CTA] if:
. . . .
(9) It does not engage in any of the following
activities;
(i)

Directing client accounts; or

(ii) Providing commodity trading advice based
on, or tailored to, the commodity interest or
cash market positions or other circumstances
or characteristics of particular clients; or
(10) If, as provided for in section 4m(1) of
the Act, during the course of the preceding 12
months, it has not furnished commodity trading
advice to more than 15 persons and it does not
hold itself out generally to the public as a
[CTA.]
17 C.F.R. § 4.14(a).

Under Defendant’s interpretation, the use of

“or” between Section 4.14(a)(9)(i) and 4.14(a)(9)(ii) “means that
either one or the other would individually qualify [D]efendant as
an exemption, so therefore technically [D]efendant could direct
accounts so long as they were all directed identically, but if he

-10-

didn’t direct accounts, however did provide commodity advice to
individuals tailored to their circumstances, which would also
qualify

as

exemption.”

(Docket

Entry

39

at

7.)

Defendant

similarly reads the use of “or” between Section 4.14(a)(9) and
4.14(a)(10)

as

“meaning

that

if

either

of

these

conjunctive

conditions is true, then [D]efendant qualifies as an exemption.”
(Id.) Thus, Defendant concludes that, because “at no time did [he]
give advice that was tailored to even one individual,” he was not
a CTA and was not required to register as a CTA.

(Id.)

Defendant’s position does not comport with a proper reading of
the Regulation. Rather, by conducting any of the activities listed
in Section 4.14(9), Defendant failed to meet the registration
exemption of Regulation 4.14.

Because Defendant admits that he

directed client accounts (see Docket Entry 38-1 at 80-81; see also
Docket Entry 39 at 7-8 (“Yes [] [D]efendant traded accounts for
individuals who ask him to, and this could be referred to as
‘directing’ an account . . . .”)), and did so without registering
as a CTA (see Docket Entry 38-1 at 86-87), and because the Website
included both client testimonials and hypothetical trading results
without the required, corresponding cautionary language (id. at 8487), the Court should enter summary judgment in favor of Plaintiff.
B.

Relief
Plaintiff moves the Court to (1) “enter an order of permanent

injunction, including a trading prohibition” (Docket Entry 37 at

-11-

3); and (2) “impose a civil monetary penalty of $420,000 against
[Defendant]” (id.).
i.

Permanent Injunction

“Upon a proper showing, a permanent or temporary injunction or
restraining order shall be granted without bond.”
1(b).

7 U.S.C. § 13a-

“An injunction prohibiting a party from engaging in conduct

that violates the provisions of a statute is appropriate when there
is

a

likelihood

that,

unless

enjoined,

the

violations

will

continue.” C.F.T.C. v. American Bd. of Trade, Inc., 803 F.2d 1242,
1250-51 (2d Cir. 1986).

Moreover, several courts have imposed

broad permanent injunctions on violators, barring all trading of
commodity futures contracts on behalf of others.

See C.F.T.C. v.

United Investors Grp., Inc., 440 F. Supp. 2d 1345, 1362 (S.D. Fla.
2006), aff’d in part and vacated in part on other grounds, C.F.T.C.
v. Levy, 541 F.3d 1102 (11th Cir. 2008); C.F.T.C. v. Noble Wealth
Data Info. Servs., Inc., 90 F. Supp. 2d 676, 695 (D. Md. 2000),
aff’d in part & rev’d in part on other grounds, C.F.T.C. v.
Baragosh, 278 F.3d 319 (4th Cir. 2002); C.F.T.C. v. Rosenberg, 85
F. Supp. 2d 424, 456 (D.N.J. 2000).

In rare circumstances, courts

have permanently enjoined violators from all commodities trading,
including from their personal accounts.

See C.F.T.C. v. Castillo,

No. 3:06CV2540-TEH, 2008 WL 2971665, at *8 (N.D. Cal. July 11,
2008) (unpublished); C.F.T.C. v. Poole, No. 1:05CV859, 2006 WL
1174286, at *6 (M.D.N.C. May 1, 2006) (unpublished).

-12-

In determining the appropriateness of an injunction, “‘the
ultimate test . . . is whether the defendant’s past conduct
indicates there is a reasonable likelihood of further violations in
the future.’”

C.F.T.C. v. Wilshire Inv. Mgmt. Corp., 531 F.3d

1339, 1346 (11th Cir. 2008) (quoting S.E.C. v. Caterinicchia, 613
F.2d 102, 105 (5th Cir. 1980)).

In that regard, the Court should

consider the following factors:
[T]he 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.
Id. (quoting S.E.C. v. Carriba Air., Inc., 681 F.2d 1318, 1322
(11th Cir. 1982)).

“The standard for an injunction under the Act

differs from that in the normal civil context in that proof of
irreparable harm is not required.”

C.F.T.C. v. American Metals

Exch. Corp., 991 F.2d 71, 74 n.3 (3d Cir. 1993).
On the instant facts, the relevant factors weigh in favor of
granting Plaintiff’s request for a permanent injunction.

As

Plaintiff notes (see Docket Entry 38 at 14), Defendant’s conduct
spanned a 12-month period (see Docket Entry 38-1 at 84), thereby
establishing a systematic pattern of activity.

See C.F.T.C. v.

Hunt, 591 F.2d 1211, 1220 (7th Cir. 1979) (“When the violation has
been founded on systematic wrongdoing, rather than an isolated
occurrence,

a

court

should

be

more

-13-

willing

to

enjoin future

misconduct.”); see also C.F.T.C. v. Aurifex Commodities Research
Co., No. 1:06-CV-166, 2008 WL 299002, at *9 (W.D. Mich. Feb. 1,
2008) (unpublished) (citing same).

Evidently, Defendant took

actions without first acquainting himself with the Rules and
Regulations governing his actions (see Docket Entry 38-1 at 10 (“I
don’t

know

the

rules,

I

don’t

know

the

regulations.”))

and

Defendant appears unwilling and/or unable to comport his activity
with the applicable Rules and Regulations (see id. (“[W]hen I
looked on the internet [for the applicable Rules and Regulations],
some of this stuff just seemed like -- what’s a better word to say
than gobbledygook.”).)

Finally,

Defendant

maintains complete

innocence - denying any wrongdoing for the foregoing acts. (Id. at
10 (“I’m just defending myself because I know I’m innocent.”).)
These circumstances establish “a likelihood that, unless enjoined,
the violations will continue,”

American Bd. of Trade, 803 F.2d at

1250-51, and the Court thus should enter a permanent injunction
against Defendant.
As to the scope of the permanent injunction, the Complaint
seeks to bar “any conduct or activity that . . . . involves . . .
entering into any transactions involving commodity futures, options
on commodity futures, [and related financial instruments] . . . for
his own personal accounts or for any accounts in which he has a
direct

or

indirect

interest.”

(See

Docket

Entry

1

at

12.)

However, Plaintiff’s instant Motion neither specifically requests

-14-

an injunction against personal trading nor provides support for
such a prohibition.

(See Docket Entry 38 at 13-17.)

In the

instant case, Defendant’s past conduct and denial of wrongdoing
create a risk of future misconduct sufficient to justify a lifetime
registration ban and prohibition on trading for others.

The

record, however, does not reflect aggravating circumstances of the
sort present in cases in which courts imposed bans on even personal
trading.

See Castillo, 2008 WL 2971665, at *5 (“Clients lost

$814,858.89 through purchasing Defendants’ trading systems.”);
Poole, 2006 WL 1174286, at *3 (“[D]efendant defrauded clients and
prospective clients by providing fictitious client testimonials
attesting to the success that purported clients had achieved using
the

trading

system.”).

The

Court

thus

should

not

adopt

an

injunction as broad as requested in the Complaint.
ii.

Civil Monetary Penalty

“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[.]”

7 U.S.C. § 13a-1(d)(1).

The Code of

Federal Regulations increases this amount for acts committed after
October 23, 2008: the “inflation-adjusted maximum civil monetary
penalty for each violation of the [Act] or the rules, regulations

-15-

or orders promulgated thereunder that may be assess or enforced
under the [Act] in . . . a civil action in Federal court [is] . . .
not more than the greater of $140,000 or triple the monetary gain
to

such

person

for

§ 143.8(a)(ii)(D).
or

$420,000

Complaint.”

for

each

such

violation[.]”

17

C.F.R.

Plaintiff “seeks the maximum fine of $140,000
all

three

violations

(See Docket Entry 38 at 17.)

as

alleged

in

the

[]

According to Plaintiff,

“a $420,000 civil monetary penalty, plus a lifetime registration
and trading ban, recognizes the seriousness of the violations and
will act as a deterrent to future violations of the Act and
Regulations.”

(Id.)

“In evaluating civil penalties under the Act, courts have
considered the general seriousness of the violation as well as any
particular mitigating or aggravating circumstances that exist.”
C.F.T.C. v. Gresham, No. 3:09-CV-75-TWT, 2011 WL 8249266, at *7
(N.D. Ga. Sept. 8, 2011) (unpublished).

“In calculating a civil

penalty, ‘the financial benefit that accrued to the respondent
and/or the loss suffered by customers as a result of the wrongdoing
are especially pertinent factors.’”

R&W Technical Servs. Ltd. v.

C.F.T.C.,

Cir.

205

F.3d

165,

178

(5th

2000)

(quoting

In

re

Grossfeld, [1996-1998 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶
44,468 & n. 34. (Dec. 10, 1996)).

“The [C]ourt may use such a fine

as a deterrent of future violations, but the amount of the fine
should be proportional to the gravity of the offenses committed.”

-16-

C.F.T.C. v. Premium Income Corp., No. 3:05-CV-0416-B, 2007 WL
4563469, at *7 (N.D. Tex. Dec. 28, 2007) (unpublished) (internal
quotation marks omitted).

In addition, some authority establishes

that “the [Court] may, in its discretion, consider Defendant[’s]
net worth in assessing a civil penalty under 7 U.S.C. § 13a1(d)(1).”

C.F.T.C. v. King, No. 3:06-CV-1583-M, 2007 WL 1321762,

at *5 (N.D. Tex. May 7, 2007) (unpublished); see also C.F.T.C. v.
R.J. Fitzgerald & Co., No. 8:99-CV-1558-T-MSS, 2006 WL 1406542, at
*1 (M.D. Fla. May 19, 2006) (unpublished) (“The case law cited by
[the] [d]efendants shows that the changes in [the] Act in 1992 does
[sic] not bar the introduction of such evidence.

The Court will

consider evidence of [the] [d]efendants’ ‘net worth’ or ability to
pay when determining the amount of civil penalties to assess this
case.”).5
On the facts of this case, the Court should not impose the
maximum monetary civil penalty.

As an initial matter, the record

does not reflect particularly egregious actions by Defendant, such
as facts indicating that he knowingly defrauded clients, see
Wilshire Inv. Mgmt., 531 F.3d at 1346 (“Defrauding customers is a

5

The court in King concluded that although Section 209 of the
Futures Trading Practices Act of 1992, Pub. L. No. 102-546, § 209,
106 Stat. 3590, 3606-07 (1992), “modified 7 U.S.C. § 9a to no
longer require the consideration of, in the Commission’s assessment
of a civil monetary penalty under 7 U.S.C. § 9, 15, the net worth
of the defendant,” King, 2007 WL 1321762, at *5 (emphasis added),
it did not limit the court’s ability to consider such information
in assessing a civil monetary penalty under 7 U.S.C. § 13a-1(d)(1),
id.
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violation of the core provisions of the [Act] and should be
considered very serious.” (internal quotation marks omitted)), or
that he misappropriated client funds, see C.F.T.C. v. Driver, 877
F.

Supp.

2d

968, 978

(C.D.

Cal.

2012)

(“Misappropriation

or

diversion of funds entrusted to one for trading purposes is willful
and

blatant

omitted)).

fraudulent

activity.”

(internal

quotation

marks

Most importantly, the lack of evidence of customer

losses or complaints identified by Plaintiff (see Docket Entry 38)
distinguishes this case from those in which courts applied the
maximum penalty.

See, e.g., Noble Wealth, 90 F. Supp. 2d at 694

(imposing maximum penalty of triple Defendant’s monetary gain where
“Defendant engaged in repeated core violations of the Act over a
period

of

several

years

and

received

direct

benefit

from

[company’s] fraudulent operations despite the mounting losses of
its customers.”).
Nor does the record contain evidence that Defendant enjoyed a
financial windfall from his actions; in fact, Defendant reported
indigence several times (see Docket Entry 38-1 at 31 (“I don’t have
money to hire anybody, I don’t have money to hire a lawyer, I’m
barely making my house payment.”).) Defendant’s asserted indigence
also weighs against imposing the maximum penalty.

See, e.g.,

Rosenberg, 85 F. Supp. 2d 424, 455 (imposing no civil monetary
penalty on top of restitution order because Defendant “d[id] not
have the financial means to pay any amount set by the Court”).

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Nonetheless, Defendant’s failure to accept responsibility for
his actions and insistence that the Rules and Regulations do not
apply to him (see Docket Entry 39 at 1-2) justify the imposition of
a substantial penalty.
at 1361.

See United Investors Grp., 440 F. Supp. 2d

An amount of half of what Plaintiff requests - i.e., half

of the maximum penalty - would meet the goals of punishment and
deterrence and would more appropriately reflect the gravity of the
misconduct at issue.

Accordingly, the Court should award a civil

penalty in the amount of $210,000 against Defendant.
IV.

CONCLUSION

The unrebutted evidence before the Court establishes that
Defendant qualified as a CTA under the Act and violated 7 U.S.C.
§ 6m(1), 17 C.F.R. § 4.41(a)(3), and 17 C.F.R. § 4.41(b)(1).
IT

IS

THEREFORE

RECOMMENDED

that

Plaintiff’s

Motion

for

Summary Judgment Against Defendant Neal E. Hall (Docket Entry 37)
be granted.
IT IS FURTHER RECOMMENDED that the Court enter a permanent
injunction prohibiting Defendant and any of his agents, servants,
employees, assigns, attorneys, and persons in active concern or
participation with the Defendant, including any successor thereof,
from engaging, directly or indirectly, in any conduct or activity
that:

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(a)

violates Section 4m(1) of the Act, 7 U.S.C. § 4m(1), or
Regulations

4.41(a)(3)

and

(b)(1),

17

C.F.R.

§§ 4.41(a)(3) and (b)(1);
(b)

results in trading on or subject to the rules of any
registered entity (as that term is defined in Section 1a
of the Act, codified as amended at 7 U.S.C. § 1a(40));

(c)

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

7

U.S.C.

§§

2(c)(2)(B)

and

2(c)(2)(C)(i)) (“forex contracts”);
(d)

relates to or otherwise involves 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;
(e)

relates

to

or

otherwise

involves

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

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registration with the CFTC, except as provided for in
Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9); and
(f)

constitutes acting as a principal (as that term is
defined in Regulation 3.1(a), 17 C.F.R. § 3.1(a)), agent
or any other officer or employee of any person registered
exempted from registration or required to be registered
with the CFTC, except as provided for in Regulation
4.14(a)(9), 17 C.F.R. § 4.14(a)(9).

IT IS FURTHER RECOMMENDED that the Court assess a civil
monetary penalty against Defendant in the amount of $210,000.

/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
November 21, 2013

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