Daniel Adam Hewko and his firm Main & Prospect Capital, LLC were ordered by the U.S. District Court for the Central District of California to pay monetary sanctions, and equitable relief to their victims of fraud after charges from the CFTC.
In November 2019, the Commodity Futures Trading Commission had brought forth charges of fraud, misappropriation of investor funds and failing to register with the CFTC against Hewko, his father, and the company.
According to the findings, Hewko and MPC began seeking investments into a pooled investment vehicle operated by MPC in August 2014. The vehicle was marketed as the Global Opportunity Fund.
Throughout 2014, the firm transferred more than $1.1 million collected from the investors into a futures trading account with a futures commission merchant (FCM). In December, the funds were transferred to an account at another FCM where they remained until approximately the summer of 2016.
Fund never earned any investment gains
The accounts were used to conduct limited trading of futures contracts, including crude oil and E-mini S&P futures contracts, both of which were traded on designated contract markets.
The defendants began issuing quarterly statements in approximately January 2016, but all investment returns claimed in account statements provided from the fourth quarter of 2015 through third quarter of 2018 were false, the CFTC found.
The fund was suffering losses during that period, but the statements said otherwise, indicating returns with wide ranging percentages of false growth.
The defendants were found to have known these statements were false as the fund never earned any investment gains. The court determined the defendants failed to appropriately use investor funds, and misappropriated funds for the benefit of Hewko, his family, and unrelated companies he owned or controlled.
The U.S. District Court for the Central District of California ordered Daniel Adam Hewko and MPC to pay $1,906,395 in restitution to victims of the fraudulent scheme and to pay a $5.7 million civil monetary penalty.
The CFTC, however, has warned that victims may not recover the money lost because the defendants may not have sufficient funds or assets.