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January 04, 2005 at 07:00 PM
WASHINGTON (HedgeWorld.com)–The Commodity Futures Trading Commission settled a lawsuit over an unregistered commodity pool and the misappropriation of its funds, with defendants Paulino Rene Dias Jr. and Victor Smith, both California residents, and Krute Corp., Woodland Hills, Calif. The CFTC initiated this action in April 2003.
Mr. Dias was an associated person of various introducing brokers intermittently between 1993 and October 2002, when the National Futures Association suspended his AP registration for lying, and for failing to cooperate with the NFA’s investigation of Krute.
The CFTC alleged that beginning in or around November 2001, Krute, a Nevada corporation that was under Mr. Dias’ control and that employed Mr. Smith, solicited money for a commodity pool that would trade commodity futures contracts and options thereon.
According to Krute’s agreement with its pool participants, it was entitled to 25% of profits generated from its investments, as well as 0.25% of assets for management and accounting services. There is no evidence that Krute ever earned a profit on investments. Nonetheless, during the course of the pool’s operation, Krute and the individual defendants directed a substantial portion of the pool’s assets to pay business expenses, such as employee salaries and rent, as well as personal expenses, such as seven months’ rent on Mr. Dias’ apartment.
