US derivatives regulator Commodity Futures Trading Commission (CFTC) announced that the US District Court for the District of New Jersey entered a default judgment against Illinois-based Valdas Dapkus on November 28. On May 4, the court issued a default injunction against two entities controlled by Dapkus – Tradewale LLC and Tradewale Managed Fund.
The court orders resolve the CFTC’s September 2021 lawsuit against Dapkus and Tradewale entities, finding all defendants liable for fraudulently soliciting members of the public to invest in a purported retail OTC fund managed by Tradewale and misappropriation of investment funds. Tradewale entities were also found liable for failing to register as Commodity Trading Advisers (CTAs).
The orders require Dapkus and the Tradewale entities to pay, jointly and severally, $713,520 in restitution and a penalty of $2,140,560. The orders also impose permanent injunctions on Dapkus and the Tradewale entities, prohibiting them from, among other things, trading on CFTC-regulated markets and engaging in conduct that violates the Commodity Exchange Act (CEA), as alleged in the complaint.
Case background
The September 2021 complaint alleged, among other things, that in attracting members of the public to trade, Tradewale made various material misrepresentations and omissions, including that it had a “unique trading system” that uses “artificial intelligence” to trade forex. Tradewale also claimed to have generated average monthly returns of 4%-11% and average annual returns of over 55% with “minimal risk”.
The complaint further alleged that although Tradewale’s solicitation materials claimed the accounts were “easy to access,” most, if not all, of Tradewale’s customers in the United States were never able to withdraw money from their accounts. Instead, the defendants misappropriated client funds for unauthorized purposes, including misappropriating funds into bank accounts Dapkus created and was the sole signatory to.
In its orders and related opinions, the court found that the complaint sufficiently alleged that Dapkus and the Tradewale entities intentionally made material misrepresentations and omissions to induce individuals to deposit and invest funds in Tradewale and then misappropriated those funds. for their own benefit. The court further found that the Tradewale entities received approximately $713,520 from approximately 17 clients and that none of these clients received any return of their principal investment.
The court also found that, as alleged in the complaint, the Tradewale entities acted as CTAs because they solicited funds for an investment vehicle through the mail or other means of interstate commerce and did so without registering with the CFTC.
The CFTC cautions that orders requiring the return of funds to victims may not result in the recovery of any lost money because the offenders may not have sufficient funds or assets. The CFTC said it will continue to fight vigorously to protect customers and to ensure that violators are held accountable.