CFTC Obtains $2.1 Million Judgment Against Iowa Commodity Trader for Fraudulent Scheme

 — The Commodity Futures Trading Commission (CFTC) announced today that on November 26, an Order and Judgment by Default (Order) was entered against Lon Olen Friedrichsen (Friedrichsen) of Alton, Iowa in connection with a fraudulent scheme to illegally trade NYMEX West Texas Intermediate Light Sweet Crude Oil futures contracts on behalf of customers.

The Order requires Friedrichsen to pay $591,570 in restitution and imposes a civil monetary penalty of $1,500,000.  The Order also permanently bans Friedrichsen from the markets the CFTC regulates and permanently enjoins him from future violations of the Commodity Exchange Act and CFTC Regulations, as charged.

The Order, entered by Judge Gregory H. Woods of the U.S. District Court for the Southern District of New York, resulted from a Complaint the CFTC filed against Friedrichsen on March 2, 2018, alleging fraud and registration violations.  [See CFTC Complaint and Press Release 7701-18.]

Following a hearing on November 21, 2018, the court determined that from at least June 25, 2014, through June 30, 2018, Friedrichsen, without being registered with the CFTC as required, engaged in a fraudulent scheme to obtain access to the futures trading accounts of at least 41 customers in exchange for a 50/50 split of any trading profits he obtained.  According to the Order, rather than profitably trade customers’ accounts, Friedrichsen’s trading caused his customers to incur losses of at least $591,570.

According to the Order, Friedrichsen used and other means to entice customers with misrepresentations about his trading experience and profits.  Among other false statements, Friedrichsen represented that he was a CFTC-registered trader who would earn customers 10 percent daily trading profits.  As described in the Order, Friedrichsen also “fabricated futures trading reports that falsely reflected highly profitable trading and tens of millions of dollars under [Friedrichsen’s] management.”  In reality, Friedrichsen overstated his trading prowess and “generated excessive losses” in customers’ accounts.

The CFTC Division of Enforcement staff members responsible for this action are Daniel J. Grimm, Dmitriy Vilenskiy, George Malas, A. Daniel Ullman II, Michael R. Berlowitz, Paul G. Hayeck and former staff members Lucy Hynes and Jason Mahoney.