U.S. Commodity Futures Trading Com'n v. Rolando
| Decision Date | 10 December 2008 |
| Docket Number | No. 3:08-CV-0064(MRK).,3:08-CV-0064(MRK). |
| Citation | 589 F.Supp.2d 159 |
| Court | U.S. District Court — District of Connecticut |
| Parties | UNITED STATES COMMODITY FUTURES TRADING COMMISSION, Plaintiff, v. Diego Mariano ROLANDO a/k/a Roclerman and ROC d/b/a IA trading.com Inc., Defendant. |
Braden M. Perry, Charles D. Marvine, Jo Mettenburg, Kenneth McCracken, U.S. Commodity Futures Trading Commission, Kansas City, MI, John B. Hughes, U.S. Attorney's Office, New Haven, CT, for Plaintiff.
RULING AND ORDER GRANTING DEFAULT JUDGMENT, PERMANENT INJUNCTION, CIVIL MONETARY PENALTY, AND ANCILLARY EQUITABLE RELIEF AGAINST DEFENDANT DIEGO MARIANO ROLANDO A/K/A ROCLERMAN AND ROC D/B/A IA TRADING.COM INC.
On January 15, 2008, plaintiff United States Commodity Futures Trading Commission (CFTC) filed its Complaint for Injunctive and Other Equitable Relief and for Civil Monetary Penalties. The Complaint [doc. # 1] alleged that defendant Diego Mariano Rolando a/k/a Roclerman and ROC d/b/a/ IA Trading.com Inc. (collectively referred to as "Mr. Rolando") engaged in a multi-million dollar fraudulent investment scheme involving commodity futures contracts (futures) and options on commodity futures contracts (options). Specifically, the Complaint alleged violations of §§ 4b(a)(2)(C)(i)-(iii) and 4c(b) of the Commodity Exchange Act, as amended (the "Act"), 7 U.S.C. §§ 6b(a)(2)(C)(i)-(iii) and 6c(b), and § 33.10(a)-(c) of the CFTC's Regulations (the "Regulations"), 17 C.F.R. § 33.10(a)-(c) (2007). The Complaint sought, among other things, injunctive relief, disgorgement, restitution, and a civil monetary penalty.
Mr. Rolando's Answer was due on or before February 5, 2008, but to date, he has not filed or served his Answer. On February 13, 2008, the CFTC, pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, served and filed its Request for Clerk's Entry of Default [doc. # 26] against defendant. The Clerk of the Court entered the default [doc. # 27] against Mr. Rolando on February 14, 2008.
The CFTC now has submitted its Application for Entry of Default Judgment, Permanent Injunction, Civil Monetary Penalty, and Ancillary Relief [doc. # 79] ("Default Judgment Application") against Mr. Rolando pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. Having considered carefully the Complaint, the allegations of which are wellpleaded and hereby taken as true, the Application for Default Judgment, and related filings by the Receiver, the Court GRANTS the CFTC's Application for Default Judgment and enters the following findings of fact and conclusions of law finding Mr. Rolando liable as to all violations alleged in the Complaint. Accordingly, the Court now issues the following Order for Entry of Default Judgment, Permanent Injunction, Civil Monetary Penalty, and Ancillary Relief Against Defendant, which determines that Mr. Rolando has violated §§ 4b(a)(2)(C)(i)-(iii) and 4c(b) of the Commodity Exchange Act, as amended, 7 U.S.C. §§ 6b(a)(2)(C)(i)-(iii) and 6c(b) (2002), and § 33.10(a)-(c) of the CFTC's Regulations (Regulations), 17 C.F.R. § 33.10(a)-(c) (2007).
The United States Commodity Futures Trading Commission is an independent federal regulatory agency of the United States that is charged with the responsibility for administering and enforcing the provisions of the Act, 7 U.S.C. §§ 1 et seq., and the Regulations, 17 C.F.R. §§ 1.1 et seq., promulgated thereunder.
Diego Mariano Rolando a/k/a Roclerman and ROC and d/b/a IA Trading, age 30, is a citizen of Buenos Aires, Argentina. Since at least 2005, Mr. Rolando—individually and doing business as IA Trading— has been actively trading in the U.S. financial markets through accounts he held and/or controlled at Interactive Brokers LLC ("IB"), a futures commission merchant and broker-dealer located in Greenwich, Connecticut. Neither Mr. Rolando nor IA Trading has ever been registered with the CFTC in any capacity. Further, IA Trading is not incorporated in the United States; although, www.IATrading.com (IATrading.com) lists a Scarsdale, New York address on its domain registration.
From 2005 to 2007, through IA Trading and its website IATrading.com, Mr. Rolando operated a fraudulent investment scheme in which he solicited millions of dollars from hundreds of customers residing in the United States and around the world. Although most of his customers were from Argentina, his customers also included citizens of the United States, England, Italy, Spain, Panama, Paraguay, and Venezuela. Ultimately, based on Mr. Rolando's misrepresentations, these customers invested more than $34 million in his fraudulent scheme, the details of which are described below.
Mr. Rolando operated his investment scheme through a phony company called IA Trading. With the assistance of numerous brokers and his IATrading.com and www.Roclerman.com websites, Mr. Rolando was able to convince customers that IA Trading operated a sophisticated financial operation, complete with its own trading platform. Further, IATrading.com stated that IATrading was an affiliate of the U.S. brokerage firm IB; thus, falsely lending legitimacy and a U.S. connection to Mr. Rolando's operations. The materials Mr. Rolando provided to customers even went so far as to incorrectly state that IA Trading's address was 1 Pickwick Plaza, Greenwich, Connecticut, which is IB's address. Additionally, Mr. Rolando and his brokers expanded their misrepresentations to state that IATrading.com provided a way to invest directly through IB. Specifically, the materials provided to his customers stated that "[t]he broker—IATrading.com Inc.—takes charge itself provid[es] the platform of access to the stock market, open[s] the account in the clearing house and the bank ... [t]he `clearing house' is: IB, LLC."
As part of his investment scheme, defendant solicited customers, both directly through written and oral communications and indirectly through a stable of brokers or other customers. Defendant and his brokers enticed potential customers to invest with IATrading by falsely representing that his investment system focused on conservative growth in highly rated stocks on U.S. markets. Defendant's Roclerman.com brochure stated that "[w]e trade only high-rated stocks and indexes." Defendant also misrepresented that trading would take place exclusively on the New York Stock Exchange or through the NASDAQ system.
Mr. Rolando used IB, a clearing broker, as the company through which he conducted his actual trading activity, and he used IB's electronic platform to open investor accounts. As an initial step, in September 2005, Mr. Rolando completed an online application to open a third-party advisor account at IB seeking to have IB act as clearing broker for accounts under his control.1 When submitting this application, Mr. Rolando represented to IB that all information he would provide to IB regarding his customers would be true and correct and that any documents he would provide to IB to open customer accounts would be reviewed by these customers and provided in an unaltered and original form. Mr. Rolando also indicated in the application that he was not required to be registered in Argentina as an investment advisor, commodity trading advisor, or their equivalent. IB accepted Mr. Rolando's application, and he was authorized to open accounts at IB for his customers.
Although Mr. Rolando's name appears as an advisor on only 30 customer accounts he opened at IB, he actually controlled the trading in approximately 4202 accounts at IB. Pursuant to IB policy, unregistered advisors, such as defendant, are permitted to have only a certain number of managed accounts and only can manage $25 million in assets. To circumvent this policy, on hundreds of online account applications submitted to IB, Mr. Rolando fraudulently identified 24 different persons as "advisors" on customer accounts that he actually controlled.
Mr. Rolando was able to accomplish his fraudulent scheme by controlling the flow of information between his customers and IB. Prospective customers either logged onto IATrading.com and filled out account application forms or provided Mr. Rolando with account opening documents believing they were opening accounts at IATrading. After potential customers filled out the necessary forms and provided the requested information, Mr. Rolando would use the information to open new accounts at IB in the customers' names. Under normal circumstances, customers would have been able to access their accounts at IB directly by using an electronic password linked to their accounts, but Mr. Rolando intercepted this information and used it to maintain complete control over the accounts. The only thing the customers saw was the fictitious account statements on IATrading.com, which used the same account number provided by IB. Instead of linking IATrading.com to the actual deposit, withdrawal, transfer, and trading activity occurring at IB, Mr. Rolando provided false trading and balance information on IATrading.com statements.
Since at least October 2006, Mr. Rolando provided or caused to be provided false account statements to customers. He created these false customer account statements by periodically uploading a spreadsheet he created to IATrading.com. The positions and trades that customers saw when they logged onto IATrading.com were false and did not accurately represent positions and trades in each individual client account at IB. These false account statements misrepresented that customer funds were invested entirely in securities when,...
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