Rexburg businessman Michael Justin Hoopes has been ordered to pay more than $10.4 million in restitution and a civil penalty of over $1.4 million for operating a Ponzi scheme. The U.S. Commodity Futures Trading Commission obtained the federal court order alleging Hoopes' scheme defrauded Idaho residents and others.
The court order stems from a CFTC complaint filed in October 2011 alleging Hoopes fraudulently solicited and accepted $2,068,103 from ten individuals, mostly Idaho residents, to trade stock index commodity futures in a commodity pool that he owned and operated called Aspen Trading, LLC.
The order also found that Hoopes solicited an additional $9.68 million from other mostly Idaho residents during the same period for various other investments, all of which was extensively commingled with Hoopes' personal funds and accepted for futures trading in Aspen Trading.
According to a CFTC news release, Hoopes misappropriated at least $151,694 of the commingled funds for his personal expenses including a car, credit card, and mortgage payments.
Between October 2006 and May 31, 2011, Hoopes suffered net losses of more than 90 percent of the nearly $2.3 million he traded in futures.
To conceal his losses, Hoopes paid pool participants $594,339 in purported profits in the manner of a Ponzi scheme and issued false account statements to at least one pool participant showing that the Aspen Trading account was earning monthly profits as high as 83.52 percent, with only one losing month, according to the order.
In reality, however, Hoopes never opened a trading account in Aspen Trading's name but simply altered his personal trading account statements to make it appear as though the Aspen Trading account was earning large profits from futures trading, the order finds.
U.S. District Judge Edward Lodge froze Hoopes' assets in October 2011 and prohibited the destruction of books and records.
The initial complaint charged that Hoopes told at least two pool participants the potential for profit and the risk of loss for investing in Aspen Trading that they would earn 20 percent annually on their investments. He also allegedly falsely represented that his trading strategy, minimized downside market risk, that he was earning annual returns well in excess of 25 to 30 percent and that he had not lost any money in trading.