WASHINGTON — The Commodity Futures Trading Commission today announced the U.S. District Court for the Southern District of Florida ordered Systematic Alpha Management LLC, a registered commodity trading advisor and commodity pool operator, and Peter Kambolin, its owner and registered associated person, to pay more than $2.8 million for defrauding commodity pool participants.
The defendants improperly allocated profitable trades between two commodity pools and certain proprietary accounts, misled pool participants, and violated CFTC requirements on trade allocation, ultimately defrauding pool participants of more than $1.2 million.
The consent order requires the defendants to pay $1,208,503 in restitution and $1,633,119 in disgorgement. Jersey City Partners LLC, a New York firm owned by Kambolin that received some of the ill-gotten gains, is jointly liable for $701,647 of the disgorgement. The order also permanently bars the defendants from registering with the CFTC or engaging in activities requiring registration and prohibits them from trading commodity interests for their own accounts for six years.
The court found from January 2019 through November 2021, the defendants marketed Systematic Alpha Management as a commodity trading advisor and pool operator offering strategies in exchange-traded cryptocurrency and foreign exchange futures. They ran at least two pools but executed those pool trades alongside trades of their proprietary accounts and then allocated the trades across the accounts each day.
The defendants consistently directed profitable trades to their own accounts and assigned losing or less profitable trades to the pools, defrauding participants and violating CFTC requirements that customer trades be allocated fairly and equitably. They also misrepresented that the pools would primarily trade cryptocurrency and FX futures.
In a related criminal case, in September 2023, the Fraud Section of the Department of Justice charged Kambolin with one count of conspiracy to commit commodities fraud based on the same conduct. [United States v. Peter Kambolin, No. 23-20372-CR-HUCK (S.D. Fla. Sept. 19, 2023)]. He pleaded guilty and was sentenced in January 2024 to two years in prison followed by 18 months of home confinement. He was also ordered to pay $1.63 million in criminal forfeiture and $1.2 million in restitution.
The CFTC appreciates the assistance of the Fraud Section of the DOJ; the Federal Deposit Insurance Corporation, Office of Inspector General; the Financial and Capital Market Commission of the Republic of Latvia, Bundesanstalt für Finanzdienstleistungsaufsicht of Germany; the British Virgin Islands Financial Services Commission; and the United Kingdom Financial Conduct Authority.
The Division of Enforcement staff responsible for this matter are Lauren Fulks, Elsie Robinson, Rebecca Jelinek, Thomas Simek, Jordon Grimm, Christopher Reed, and Charles Marvine, along with former staff members Clemon Ashley and Benjamin Jackman.