CFTC Secures $2.8M Judgment Against Systematic Alpha’s Peter Kambolin
The Commodity Futures Trading Commission (CFTC) has announced that Systematic Alpha Management LLC and its owner, Peter Kambolin, were ordered by the U.S. District Court for the Southern District of Florida to pay more than $2.8 million later than defrauding commodity pool participants. The fraudulent scheme involved improperly allocating profitable trades to proprietary accounts while assigning losing trades to client pools, ultimately cheating investors out of more than $1.2 million.
The consent order mandates $1,208,503 in restitution to defrauded participants and $1,633,119 in disgorgement of ill-gotten gains. Jersey City Partners LLC, a New York firm owned by Kambolin, is jointly liable for $701,647 of the disgorgement. In addition, the defendants face a permanent ban on CFTC registration, a prohibition on engaging in registration-required activities, and a six-year ban from trading commodity interests for their own accounts.
Between January 2019 and November 2021, the defendants marketed themselves as offering strategies in platform-traded cryptocurrency and foreign platform futures. However, they routinely misrepresented their activities, executing trades for both their pools and proprietary accounts before skewing allocations to their own benefit in violation of CFTC rules.
Takeaway
Misrepresentation And Investor Harm
The CFTC’s findings revealed that systematically directed winning trades to their personal accounts while upsetdling investors with the losses. This deceptive practice violated core CFTC requirements ensuring fair and equitable trade allocation. Moreover, the firm falsely represented that its pools would primarily trade cryptocurrency and FX futures, a claim that further misled participants about the true nature of its operations.
The fraudulent allocation deprived pool participants of fair profits and created a distorted picture of Systematic Alpha’s performance. Investors entrusted millions to the firm, only to discover that the operators had manipulated outcomes for personal gain. These violations highlight ongoing risks in commodity pools and the importance of rigorous oversight by regulatory authorities.
The consent order reinforces the CFTC’s authority to hold registrants accountable, particularly when they exploit their registered status to deceive participants. It also signals the regulator’s continued focus on asset-related markets.
Takeaway
Criminal Case And International Cooperation
The civil case parallels a criminal prosecution. In September 2023, the Department of Justice charged Kambolin with conspiracy to commit commodities fraud. He pled guilty and, in January 2024, was sentenced to two years in prison followed by 18 months of home confinement. He was also ordered to pay $1.63 million in criminal forfeiture and $1.2 million in restitution.
The CFTC acknowledged assistance from several domestic and international regulators, including the DOJ Fraud Section, the Federal Deposit Insurance Corporation Office of Inspector General, Germany’s BaFin, the UK Financial Conduct Authority, and agencies in Latvia and the British Virgin Islands. This cooperation underscores the global dimension of financial fraud and the necessity of cross-border regulatory collaboration.
The enforcement action was carried out by CFTC staff Lauren Fulks, Elsie Robinson, Rebecca Jelinek, Thomas Simek, Jordon Grimm, Christopher Reed, and Charles Marvine, alongside former staff members Clemon Ashley and Benjamin Jackman.
Takeaway
