United States District Court, S.D. New York
U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
GARY CREAGH and WALL STREET PIRATE MANAGEMENT, LLC, Defendants.
OPINION AND ORDER
PAUL OETKEN United States District Judge.
August 5, 2015, Plaintiff U.S. Commodity Futures Trading
Commission (“Commission”) filed a Complaint
against Defendants Gary Creagh and Wall Street Pirate
Management, LLC (“WSPM”) seeking injunctive and
other equitable relief and civil penalties for violations of
the Commodity Exchange Act (the “Act”), 7 U.S.C.
§§ 1-26, and the regulations promulgated
thereunder, 17 C.F.R. §§ 1.1-190.10. (Dkt. No. 1
April 25, 2016, the Court entered a Consent Order for
Permanent Injunction and Other Statutory and Equitable Relief
Against Defendants. (Dkt. No. 39 (“Consent
Order”).) The Consent Order resolved and settled all
liability claims against Defendants and entered a permanent
injunction prohibiting them from violating the Act and
regulations as charged. (Consent Order ¶¶ 47-53.)
The issues of statutory relief pursuant to Section 6c of the
Act, 7 U.S.C. § 13a-1, as well as appropriate equitable
relief, including injunctive relief as to registration and
trading, in addition to the amount of a civil monetary
penalty (“CMP”) to be assessed against Defendants
were reserved. (Id. ¶¶ 54-55.)
Commission filed a Motion for a Supplemental Order of
Permanent Injunction and Other Equitable Relief Against
Defendants. (Dkt. No. 41.) For the reasons discussed below,
the motion is granted in part, with respect to the injunctive
relief, and denied in part, as regards the amount of the CMP.
provided in the Consent Order, facts alleged in the Complaint
and the Findings of Fact and Conclusions of Law contained in
the Consent Order are deemed true for purposes of this Order
and are incorporated herein by reference. (Consent Order
December 2011 through September 2013, WSPM-by and through its
managing member and sole employee, Creagh-willfully made
multiple false statements to the National Futures Association
(“NFA”), the self-regulatory organization for the
U.S. futures industry, in statutorily required reports and
during an NFA audit of WSPM in furtherance of NFA's
official duties under the Act. (Compl. ¶ 1; Consent
Order ¶ 47.) The NFA is a futures association registered
with the Commission pursuant to Section 17 of the Act, 7
U.S.C. § 21. (Compl. ¶ 13.) Membership in the NFA
is mandatory for all persons and entities conducting business
with the public in the U.S. futures industry, including
commodity pool operators (“CPOs”), such as WSPM,
and associated persons (“APs”) of CPOs, such as
Creagh. (Id.) NFA members are subject to audits and
investigations by the NFA to ensure compliance with NFA
rules, the Act, and related Regulations. (Id.)
individually and on behalf of WSPM, falsely represented to
the NFA that the Wall Street Pirate Fund, L.P.
(“WSPF” or “WSPF commodity pool”), a
commodity pool operated by WSPM, was not active during
calendar year 2012. (Compl. ¶ 2; Consent Order
¶¶ 31, 33, 35, 37.) Creagh knew that his statements
to the NFA were false, since he had, throughout 2012,
accepted funds from participants in the WSPF commodity pool
and actively traded commodity futures contracts on behalf of
the WSPF commodity pool, through an account in the pool's
name at a futures commission merchant called Interactive
Brokers (“Pool Trading Account”). (Compl.
¶¶ 2, 49-50.) As the sole person authorized to
trade on behalf of WSPM, and the sole person who made trades
as the agent of WSPM, Creagh knew that he had personally and
actively traded the Pool Trading Account on behalf of pool
participants during the relevant period and thus knew that
his statements to the NFA were false. (Compl. ¶ 2;
Consent Order ¶¶ 19, 21, 31, 33, 35, 37.)
throughout the relevant period, WSPM, by and through its
agent Creagh, failed to maintain required books and records
or to provide account statements and privacy notices to WSPF
pool participants in violation of the Act and Regulations.
(Compl. ¶ 4; Consent Order ¶¶ 48-50.) As such,
in addition to concealing WSPF's trading activity,
Creagh's false statements to the NFA concealed that WSPM
had failed to maintain required books and records or to
provide account statements and privacy notices to pool
participants in violation of the Act and Regulations. (Compl.
parties are largely in agreement about the nature of the
relief to be entered by the Court; they disagree only about
the amount of the CMP and whether the permanent injunction
should include a lifetime personal trading ban for Creagh.
(Dkt. No. 43 at 11.)
the personal trading ban, Creagh claims the ban is not
sufficiently related to the conduct in question.
(Id. at 10.) However, in order to obtain a permanent
injunction, “the CFTC must only show that ‘there
is a likelihood that unless enjoined, the violations will
continue.'” CFTC v. Kelly, 736 F.Supp.2d
801, 804 (S.D.N.Y. 2010) (quoting CFTC v. Am. Bd. of
Trade, Inc., 803 F.2d 1242, 1250-51 (2d Cir. 1986)).
“A district court may properly infer a likelihood of
future violations from the defendant's past unlawful
conduct.” Am. Bd. of Trade, 803 F.2d at 1251.
Courts need not enjoin only identical future violations; they
may extend to restrictions on trading activity generally, if
a court finds that defendants are not likely to “make
good faith efforts to comply with restrictions, ” more
broadly, in the future. See CFTC v. Wilshire Inv. Mgmt.
Corp., 531 F.3d 1339, 1346-47 (11th Cir. 2008); see
also, e.g., CFTC v. GIGFX, LLC, 844 F.Supp.2d
58, 64 (D.D.C. 2012); CFTC v. Rosenberg, 85
F.Supp.2d 424, 454-55 (D.N.J. 2000).
Creagh's repeated false statements to the NFA regarding
WSPM's commodity trading activity-false statements made
both in quarterly filings and during an audit (Consent Order
¶¶ 27-28)-coupled with his erroneous understanding
about his legal obligations (Dkt. No. 44 ¶¶ 6-7),
he presents a likelihood of violating trading regulations in
the future. Accordingly, a ban on personal trading is
the amount of the CMP, the Commission seeks $500, 000, or
$125, 000 for each of the four counts charged in the
Complaint. (Dkt. No. 42 at 7.) In determining an appropriate
penalty, the Court “considers the general seriousness
of the violation as well as any particular mitigating or
aggravating circumstances that exist.” Wilshire
Inv. Mgmt. Corp., 531 F.3d at 1346. The Act provides ...