Operator of commodity trading fund charged with defrauding fund participants
The Commodity Futures Trading Commission (CFTC or Commission) filed a civil enforcement action in the U.S. District Court for the Eastern District of New York, charging Defendant Harris Bruce Landgarten of Old Brookville, New York, with defrauding participants in a commodity pool that he operated, the Tradeanedge Members Fund (TMF). The CFTC Complaint also charges Landgarten with providing his pool participants false account statements and with commingling pool funds with non-pool funds.
On July 2, 2018, the U.S. Attorney’s Office for the Eastern District of New York filed a related criminal action charging Landgarten with commodity fraud and wire fraud related to the same fraudulent conduct alleged in the Complaint. Further, Landgarten was also charged with one count of obstructing the CFTC’s investigation related to Landgarten’s communications with one of his pool participants, who was a potential witness, while the CFTC’s investigation that resulted in the filing of this enforcement action was pending.
James McDonald, CFTC Director of Enforcement, commented: “This matter shows the Commission’s ongoing commitment to root out fraud from our markets. Today’s action also makes clear that we will not be deterred by those who attempt to obstruct our investigations, and that we will actively engage with our law enforcement partners both to protect our markets from fraud and to ensure wrongdoers are held accountable.”
In particular, the CFTC’s Complaint alleges that since at least July 2014 through at least March 2017 (the Relevant Period), Landgarten incurred what he characterized as expenses of TMF for which he reimbursed himself by withdrawals from TMF’s bank account. According to the Complaint, at no point during the Relevant Period did Landgarten disclose such purported expenses or withdrawals to TMF’s pool participants, either before or after their decisions to invest. Additionally, the Complaint alleges that Landgarten sent account statements to TMF participants which reflected that the value of each participant’s investment in TMF was affected only by trading gains and losses and Landgarten’s management and incentive fees, but did not indicate that he was incurring any expenses on behalf of TMF or that he was reimbursing himself for such claimed expenses.
Further, as alleged, when a participant of TMF sought to withdraw his investment, Landgarten failed to honor the request because TMF had less than the amount of the participant’s investment left in its accounts. The Complaint also alleges that, partly due to Landgarten’s inadequate record keeping practices, on numerous occasions he withdrew more money from TMF than he had incurred in claimed expenses, thus commingling pool funds with non-pool funds.
In its continuing litigation against Landgarten, the CFTC seeks full restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against violations of the federal commodities laws, as charged.
The CFTC appreciates the cooperation and assistance of the U.S. Attorney’s Office for the Eastern District of New York and the United States Postal Inspection Service.
CFTC Division of Enforcement staff members responsible for this case are Gabriella Geanuleas, Trevor Kokal, David Acevedo, Lenel Hickson, Jr., and Manal M. Sultan.