CFTC v. Fabio Bretas de Freitas and Phy Capital Investments LLC (2019)
Judgment entered
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In May 2019 the CFTC sued Fabio Bretas de Freitas and his commodity pool operator Phy Capital Investments, alleging they took client money for funds that barely traded and lied to the National Futures Association. On 3 October 2019 a New York federal court entered a default judgment ordering a $12,608,982 penalty, $5,752,042 in disgorgement and $4,625,166 in restitution and interest, with a permanent trading ban. Bretas was also convicted in a parallel criminal case.
The record
| Agency | CFTC |
|---|---|
| Release number | 7927-19 |
| Date filed | 2019-05-10 |
| Date resolved | 2019-10-03 |
| Court | U.S. District Court, Southern District of New York |
| Status | judgment |
| Criminal parallel | Yes: convicted (Bretas (sentence not stated)), U.S. District Court, Southern District of New York, 2020-02-28 |
| Bars imposed | trading ban |
| Defendants | Fabio Bretas de Freitas ; Phy Capital Investments LLC |
| Techniques |
What was ordered
- Civil penalty
- $12.6m
- Disgorgement
- $5.8m
- Prejudgment interest
- —
- Total relief
- $18.4m
- Alleged gain
- —
What is alleged to have happened
The CFTC announced the complaint on May 10, 2019 (release 7927-19) in the Southern District of New York. It alleged that the defendants took at least $7.8 million from clients for funds that never traded futures in the way promised, claimed a 49 percent return that was not real, and lied to the National Futures Association. The funds' only US exchange activity was a proprietary account that lost over $85,000 and a small managed account, and some money paid other clients in a manner akin to a Ponzi scheme.
Outcome. The CFTC's October 2019 release says Judge Furman entered a default judgment on 3 October 2019, so the defendants did not contest the case. It orders a civil monetary penalty of $12,608,982, disgorgement of $5,752,042, restitution plus prejudgment interest of $4,625,166, and a permanent ban on trading in CFTC-regulated markets. The restitution and interest figure is not stored in this record's money fields. The order's findings, as the release describes them, are that only $155,000 of $6,894,979 in client funds reached trading accounts. A May 2020 CFTC release adds that Bretas was convicted in the same court on 28 February 2020 of conspiracy to commit commodities fraud and wire fraud; no sentence is stated in the sources read, so none is recorded. The CFTC revoked the firm's and Bretas's registrations in October 2020.
Timeline
- 2019-05-10 CFTC release published
- 2019-10-03 Default judgment entered against Bretas and Phy Capital: penalty, disgorgement, restitution and permanent trading ban
- 2020-02-28 Bretas convicted of conspiracy to commit commodities fraud and wire fraud (as reported by the CFTC)
- 2020-09-30 CFTC revokes Phy Capital and Bretas registrations (initial decision on default finalized)
Primary documents
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