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Background on CFTC v. Andrew Duncan

Release: 4565-01
For Release: September 4, 2001

CANADIAN RESIDENT AND HIS OFFSHORE COMPANY CHARGED WITH DEFRAUDING U.S. AND CANADIAN INVESTORS THROUGH A COMMODITY SCAM

CFTC Alleges That Defendants Andrew Duncan and Aurum Society, Inc. Operated “Ponzi” Scheme and Fraudulently Obtained Over $3 Million from Customers

Defendants also Alleged to have Misappropriated Funds

WASHINGTON - FOREX: The Commodity Futures Trading Commission (CFTC) announced today the filing of a civil enforcement action on August 30, 2001, against defendants Andrew Duncan (Duncan) of Toronto, Ontario, and his company, Aurum Society, Inc. (Aurum), located in Bermuda. The CFTC charges the defendants with fraudulently operating a commodity pool and misappropriating customers’ funds. CFTC alleges that the defendants have fraudulently solicited at least $3 million from customers, who are located in the United States and Canada. The action was filed in the United States District Court for the Northern District of Illinois. The federal court issued an emergency restraining order freezing the assets and preserving the books and records of the defendants.

The CFTC complaint charges that from at least February 1998 through the present, Aurum and Duncan operated a classic “Ponzi” scheme in which they collected at least $3 million from unwitting customers for commodities trading, misused that money and then used customers’ funds to pay back old investors. In written solicitation materials, Duncan claimed to be a “professional commodities trader” and claimed that his pool had achieved great profits. For example, the complaint alleges that Duncan stated that the pool had earned over 2,270% in profits for the period of May 1999 to January 2000. According to the complaint, however, from January 1999, which is when trading started, through the present, the pool has had a net loss from trading. The complaint also alleges that to conceal trading losses and their misappropriation of funds, defendants issued false reports, and made oral misrepresentations, to customers concerning the performance record of the pool, the pool’s value and the value of each customer’s shares in the pools. The complaint alleges that in one instance, defendants issued a statement to a customer showing an account balance of in excess of $11 million as of June 6, 2001, when in fact the trading account actually had a zero balance.

The complaint further alleges that Duncan also obtained trading authority over personal trading accounts for two corporate customers and one individual customer and that he misrepresented the trading, performance, and value of those personal accounts. The complaint alleges that none of these accounts was as profitable as Duncan claimed and each of the customers lost nearly the entire value of their investments.

According to papers filed with the Court, customers have asked Duncan for their money back but have not received their money. Customers say Duncan repeatedly gave excuses as to why he could not give them their money, according to the complaint.

Court Hearing on CFTC's Motion for a Preliminary Injunction Set for September 12

In its continuing litigation, the CFTC is seeking preliminary and permanent injunctive relief, an accounting, restitution to customers, disgorgement of ill-gotten gains, and civil monetary penalties in amounts of not more than the higher of $110,000 for each violation (or $120,000 for each violation committed on or after October 23, 2000) or triple the monetary gain to the defendants. The Honorable Susan Conlon has scheduled a hearing on the CFTC’s motion for a preliminary injunction in the case for September 12, 2001.

The Ontario Securities Commission provided assistance to the CFTC in this matter.

Case Contact:

Scott Williamson, (312) 886-3090
CFTC Acting Regional Counsel, Central Regional Office,
CFTC Division of Enforcement

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