CFTC charges Michigan commodity pool operator with sales solicitation fraud

The complaint alleges Middlebrooks and his company engaged in a scheme that fraudulently solicited individuals in the U.S. and elsewhere to trade commodity interests, among other financial products, through a commodity pool called EIA All Weather Alpha Fund I, LP. The complaint further alleges Middlebrooks and his company solicited, accepted, and pooled millions of dollars from dozens of fund participants.

In its continuing litigation, the CFTC seeks full restitution to defrauded fund participants, disgorgement of any ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.

Case Background

The complaint alleges that as early as mid-2017, Middlebrooks and his company began soliciting individuals to invest in the fund. In doing so, they repeatedly made numerous materially false and misleading statements and omissions in order to, among other things, lure new fund participants and convince existing fund participants to maintain or increase their contributions to the fund.

As alleged, these misrepresentations and omissions included claims the fund was extraordinarily profitable when in fact it suffered catastrophic trading losses; claims grossly exaggerating the amount of assets under management in the fund; claims the fund's financial statements were audited by an outside auditing firm when in fact they were not; and false claims the fund had a five- or six-member advisory board comprised of individuals with significant experience in the financial and investment industries.

The defendants made these false claims, in part, by issuing false reports to existing and prospective fund participants in the form of falsified monthly account statements and fabricated financial statements, among other things.

Parallel Civil Action

On May 18, 2022, the Securities and Exchange Commission filed a civil injunctive action against Middlebrooks and his company in the same court alleging conduct similar to that alleged in the CFTC's complaint.

The Division of Enforcement staff responsible for this matter are Daniel Jordan, James Deacon, Erica Bodin, and Rick Glaser.

CFTC's Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which provides information about a type of fraud involving individuals and firms, often unregistered, offering investments in commodity pools. The CFTC also strongly urges the public to verify a company's registration with the Commission before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company's registration status can be found using NFA BASIC.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.