CFTC Catching the Minnow, Ignoring the Juicy Walleye

It’s full steam ahead for the CFTC, sending a CTA to prison for lying to customers. Yes you heard it right; the CFTC is holding someone accountable for wrongdoing in the industry. Upon reading the press release, we were shocked to gain knowledge that Josh Wallace of System Capital had misrepresented to clients the company’s wealth of prior experience in trading futures, accumulating $29 Million assets under management.

After an audit by the CFTC, they discovered there wasn’t much experience for Mr. Wallace to go by. CFTC went after Wallace to the full letter of the law, resulting with the quest to revoke registrations for Mr. Wallace and a 27 month prison sentence for committing criminal commodity fraud.

This is exactly what the CFTC should have their focus on.  In the last two months, the CFTC has filed charges against U.S. bank over the PFG Fraud, filing civil charges against Corzine in the MF Global scandal, and now throwing a CTA in prison for fraud.

While it only took them almost two years to get their act together on the two biggest scandals in the managed futures history, we are left scratching our heads as to how and why they were able to successfully convict a CTA for inventing a history of prior experience, and yet unable to find and build a criminal case again Corzine. If you were to ask anyone in the industry, it would not be difficult to discover evidence of how Corzine violated a portion of the Commodity Exchange Act. Yet it took federal investigators two years to announcement there will be no criminal charges against him?

Congrats, CFTC! We’re glad you caught this guy, and you pursued him. These instances are true attempts at restoring confidence in the system, because what’s the point of rules and regulations, if nobody is held accountable?  Now if only you could one up yourself, and reconsider criminal charges against Corzine…. We can only hope.


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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.