CUBE RegNews:
August 24^th

CFTC sues for alleged $3.6 million commodity pool fraud

The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against Walter Dunning Larrick, III and Cambridge Financial Advisors, LLC, a Texas limited liability company owned and controlled by Larrick. The complaint alleges that Larrick and Cambridge defrauded at least 70 people out of more than $3.6 million in a purported commodity pool. 

The complaint alleges that Larrick and Cambridge made false and misleading statements to induce investors to participate in the pool, including that Cambridge had been in business for 20 years and had a history of providing clients with profitable returns. The defendants also promised that pool participants’ funds would be used to trade futures and options, including natural gas, oil, and gold, and that they could withdraw their funds at any time. 

Instead of trading the funds as promised, Larrick and Cambridge misappropriated the money for personal expenses and to make Ponzi-like payments to other investors. The defendants also created and issued false account statements that misrepresented the trading returns pool participants purportedly earned. 

The CFTC is seeking restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations. 

SFC quarterly report highlights initiatives to develop Hong Kong as RMB and risk management center

The Securities and Futures Commission (SFC) has published its latest Quarterly Report, summarizing key developments from April to June 2023. 

The report highlights the launch of new initiatives to develop Hong Kong as an offshore renminbi and risk management center. These include: 

• The launch of Swap Connect, the first Connect program for financial derivatives products, which allows investors of Mainland bonds to hedge interest rate risks from Hong Kong. 
• The launch of the HKD-RMB Dual Counter Model, which allows for trading of 24 stocks in both Hong Kong dollars and renminbi. 
• The strong momentum of southbound ETF trading under ETF Connect, which has seen its average daily turnover increase 20 times in the past year. 

The report also notes the SFC’s commitment to carbon neutrality by 2050, and its interim target of reducing 50% of its total carbon emissions by 2030. 

In addition, the report provides key figures for the quarter, including: 

• The number of licensees and registrants increased to 48,165, including 3,245 licensed corporations. 
• The SFC processed 50 new listing applications, including five from pre-profit biotech companies and one from a specialist technology company. 
• The SFC authorized 28 unit trusts and mutual funds and 47 unlisted structured investment products for public offering in Hong Kong. 
• The SFC conducted in-depth inspections of 51 licensed corporations to review their compliance with regulatory requirements. 
• The SFC made 1,227 requests for trading and account records triggered by untoward price and turnover movements. 
• The SFC issued section 179 directions to request information in 16 cases, as part of its ongoing review of corporate disclosures. 
• Three corporations and two individuals were disciplined, which resulted in total fines of $9.2 million. 

The SFC said that it will continue to work to develop Hong Kong as an international financial center and a leading hub for renminbi and risk management.