The US Commodity Futures Trading Commission has obtained a default judgment order requiring Robert J. Sucarato to pay USD800,000 in restitution and a USD1.2m civil monetary penalty for fraudulently soliciting commodity pool participants to trade futures and options through his hedge funds and for concealing trading losses.

The default order stems from a CFTC complaint charging Sucarato, doing business as New York Financial Company, with fraud in the solicitation of customers to invest in two commodity pools and with issuing false account statements to conceal trading losses.

The order, entered on 23 November 2009 by the US District Court for the District of New Jersey, finds that from at least September 2004 through April 2008, Sucarato fraudulently solicited over USD1.2m from four individuals to participate in his two commodity pools or hedge funds, the NYFC Diversified Strategic Fund and the NYFC Strategic Fund.

The order further finds that Sucarato lured investors by falsely claiming that: 1) he has managed the funds since 1993 with approximately USD7bn in assets; 2) his funds routinely outperformed the market, having achieved a ten-year compounded return exceeding 1,800 per cent; and 3) NYFC is a registered investment adviser and portfolio manager.

According to the order, Sucarato sought to create the false impression that NYFC is a successful, well established capital management firm with offices in New York and Chicago, staffed by more than 20 experienced traders when, in fact, Sucarato’s offices were mere virtual offices. To further the illusion of success, Sucarato created a false audit report purportedly prepared by a major accounting firm reflecting that NYFC had a net worth of over USD800m, the order finds.

The court also found that Sucarato provided performance reports to pool participants reflecting that he was profitably trading commodity futures and options on behalf of the funds. In reality, he was trading pool participant funds in his personal trading accounts and was an unsuccessful trader.

The order finds that Sucarato failed to register as a commodity pool operator and failed to comply with CPO regulatory requirements. The order also permanently prohibits Sucarato from engaging, directly or indirectly, in any business activities related to commodity interest trading.