STA Opus: Profits in the Pitch, Losses in the Accounts

In the STA Opus commodity pool fraud enforcement action, a federal court ordered the company and its operator to pay $1,127,855 in restitution for misappropriated participant money. The court found that they sold investors a history of positive annual returns while the pool’s three futures accounts lost virtually all the money committed to trading. If you saw the brokerage accounts or prepared the customer statements, that difference between the business’s results and its sales story may be familiar.

The Commodity Futures Trading Commission described those findings in its November 2017 announcement of the default judgment. False account statements concealed the diversion of participant money, and the company operated without the required registration. The investment looked profitable in the version customers received.

How STA Opus Sold the Pool

At least 30 individuals invested in STA Opus. The court’s findings covered conduct from at least January 2013 through May 6, 2016, when the company and its operator falsely represented that the pool had positive annual rates of return. The actual futures accounts told the opposite story.

A commodity pool operator runs the investment vehicle and solicits or receives participants’ money for commodity-interest trading. That distinction matters here because the court found that STA Opus NR LLC acted as an unregistered commodity pool operator and the individual running it acted as an unregistered associated person when soliciting participants.

The sales story also left out the operator’s prior disciplinary history. The Commodity Futures Trading Commission said the default order found that customers were not told about earlier commission and California sanctions that included $2.5 million in restitution and fines for conducting business as an unregistered investment adviser. The commission also identified the operator as someone known by numerous aliases.

For someone inside the business, the performance claim and the history of the person selling it belong together. We look at what prospective investors were told about returns and who was asking them to entrust money to the pool.

False Account Statements Hid the Diversion

The court found that STA Opus and its operator misappropriated participants’ money and issued false account statements to conceal it. Those statements supplied the customers’ view of the investment while the underlying futures accounts recorded losses. We see the same people taking the money and writing their own report card.

The Commodity Futures Trading Commission’s announcement of its original complaint adds a concrete banking detail. The agency alleged that some customers were asked to send voided personal checks, which provided their bank-account numbers and routing information and allowed direct withdrawals from their accounts. According to the complaint, the request for a check was part of how the defendants gained access to customer money.

For someone handling customer accounts, that allegation connects the sales process to the means of taking money. We compare the banking information customers supplied, withdrawal records and participant statements with the futures accounts. The employee who handled those records may be able to explain who controlled a withdrawal and who chose the balance shown to the customer.

What the Court Ordered

The federal court in the Central District of California entered the default judgment against STA Opus and its operator on November 13, 2017. It imposed $3,383,565 in civil monetary penalties on the company and its operator, whose pool had attracted approximately $1.6 million from investors.

An associate faced a separate consent order entered on September 13, 2017. It required him to pay $50,000 in restitution to STA Opus customers and imposed a separate $50,000 civil monetary penalty. The commission said that order found he had helped get the business started in late 2012 and had taken participant funds for his own benefit.

What Evidence Is Required to Prove Fraud?

Our whistleblower experts assess how the investor pitch, trading results and account transfers fit together, with the insider who understands them. STA Opus makes that comparison unusually concrete: positive annual-return claims, losing futures accounts, false participant statements and alleged access to customers’ bank accounts. We work with the person who understands how those records fit together, including who supplied the performance figures and who could authorize money to move.

The same split between reported performance and actual results appears in the Commodity Futures Trading Commission’s complaint against Long Leaf Trading Group. The agency alleged:

The Long Leaf complaint also alleged that management monitored the recommended trades and received daily statements showing losses in substantially all customer accounts. That is the connection an insider can explain: what the business knew from its own accounts, and what it chose to tell the customer.

The International Labour Office’s 2019 paper, Law and Practice on Protecting Whistle-Blowers in the Public and Financial Services Sectors, explains why workers can expose conduct outsiders cannot see: their jobs give them access to information about operations and finances. In a business presenting false account statements, that is the value of someone who knows how the numbers reached the customer. We work with that person to understand the gap between the account records and the sales story.

Can I Get Paid for Being a Whistleblower?

The CFTC whistleblower program can pay whistleblowers a combined 10% to 30% of the sanctions collected when their information leads to successful enforcement. Employees, customers, investors and market observers can supply information, and we assess the contribution your knowledge could make with you.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. STA Opus was a Commodity Futures Trading Commission enforcement action, and the commission’s own program is the relevant award route for this kind of commodity-pool misconduct. Our whistleblower experts work with you and commodity pool whistleblower lawyers who know futures fraud cases to assess the conduct, the records and your role.

You Saw the Accounts Behind the Returns

If you know how a pool’s performance figures were produced or how customer money moved, tell our whistleblower experts what the statements left out. We develop the case around that knowledge, bring in commodity fraud whistleblower lawyers who understand pool operations, and stay beside you through the pursuit of a whistleblower award.