Federal Court Orders California Man to Pay Over $600,000 for Commodity Pool Fraud

The Commodity Futures Trading Commission yesterday announced that the U.S. District Court for the Central District of California entered a consent order on June 7 for a permanent injunction, monetary sanctions, and equitable relief against Daniel Hewko of Fort Bragg, California. 

The consent order resolves the CFTC’s claims against Hewko in the CFTC action filed against him, his son, Daniel Adam Hewko, and Main & Prospect Capital, LLC, on November 13, 2019 alleging, among other things, fraud, misappropriation of investor funds, and failing to register with the CFTC as an Associated Person of a Commodity Pool Operator. The CFTC action against Daniel Adam Hewko and Main & Prospect Capital, LLC is ongoing.

The order requires Hewko to pay $500,000 in restitution to victims of the fraudulent scheme and to pay a $107,500 civil monetary penalty. The order also permanently prohibits Hewko from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged, and imposes a permanent registration ban and a 10-year trading ban.

The order finds that since at least August 2014, Hewko solicited funds from investors for a pooled investment vehicle marketed to prospective investors as the Global Opportunity Fund (Fund). Hewko transferred more than $1.1 million in investor funds into a futures trading account which was used to trade a limited amount of futures contracts including crude oil and E-mini S&P 500 futures contracts, both of which were traded on designated contract markets. According to the order, from approximately January 2016 through approximately October 2018, Hewko emailed investors account statements for the Fund, which reported investment gains. However, all of the purported investment returns contained in the account statements were false. What little futures trading the Fund did resulted in losses, and proceeds were not invested in any other manner that generated any returns at all for investors.

The order also finds that Hewko made payments of the Fund assets to various entities and individuals who were not entitled to such payments. According to the order, Hewko also made statements to investors about their investments that were not true, including telling investors their withdrawal requests could not be satisfied because the Fund assets were “in a trade” (when, in reality, the Fund assets were not “in a trade” but rather had been dissipated) and telling at least one investor the investor’s funds were not lost or gone, which also was not true.

Further, the order finds that Hewko solicited funds for participation in a commodity pool but failed to register with the CFTC as an Associated Person of a Commodity Pool Operator.