The federal Commodity Futures Trading Commission on Wednesday announced the filing of an enforcement action in federal court alleging fraud and misappropriation by an Alabama man who was in business with Texas Tech football coach Tommy Tuberville.
John David Stroud and his companies – some of which were named TS Capital, for Tuberville and Stroud – allegedly stole more than $2.2 million from participants in two commodity pools and lost more than $1.1 million on trades, according to an announcement by the CFTC in Washington, D.C. The action was filed Monday.
Stroud and the companies – Stroud Capital Management LLC, TS Capital Partners LLC, and TS Capital Management LLC, all of Auburn, Ala. – were named as defendants. Tuberville, formerly of Camden and formerly head football coach at Auburn University, was not.
Tuberville has denied any wrongdoing, despite having been described in TS Capital literature as having "day-to-day oversight of business decisions" and "overseeing investment opportunities."
On Wednesday, "U.S. District Court Judge Myron H. Thompson entered an emergency restraining order freezing defendants’ assets," the CFTC announced. "The order also prohibits the defendants from destroying books and records and denying CFTC staff access to such records. The judge set a hearing date for March 16, 2012."
Fraud allegations against Stroud and Tuberville were reported last week when seven victims filed a civil suit against the two men and their companies in Alabama. Arkansas Business reported on Monday that one of the plaintiffs is Debra Clark of Lake Village, who invested some $285,000 with the Stroud-Tuberville companies.
Here is more from the CFTC statement:
"The CFTC’s complaint, filed on March 5, 2012, charges that since at least February 2008, Stroud and his companies fraudulently solicited and accepted at least $4.8 million from at least 17 individuals and used the funds to trade commodity futures and off exchange foreign currency (forex) contracts in the Stroud Capital Fund, L.P. and the TS Capital Fund, L.P. commodity pools. When soliciting and accepting funds, Stroud allegedly misrepresented to prospective and actual pool participants that he was a successful commodity futures trader and that both pools were profitable. In reality, Stroud lost more than $1.1 million trading commodity futures and forex between August 2008 and October 2011, according to the complaint. Moreover, the defendants allegedly misappropriated more than $2.2 million of pool participant funds between at least April 2008 and the present for various personal expenses, including car payments, travel expenses, entertainment, and retail purchases.
"To conceal their fraud, the defendants sent pool participants false account statements, tax records that misrepresented the profitability of their accounts, and at least one bank account statement reflecting substantial profits and failing to disclose Stroud’s significant trading losses and his misappropriation of participant funds, according to the complaint.
"In a further effort to conceal the fraud, Stroud and TS Capital Management allegedly willfully made false representations to, and concealed information from, the National Futures Association (NFA) during two audits conducted in April and October 2011. In connection with the audits, TS Capital Management and Stroud misrepresented to the NFA that they traded only proprietary funds, concealed its trading of customer funds, and misrepresented the amount of funds it managed, according to the complaint.
"After the defendants ran out of funds and their scheme collapsed, Stroud allegedly confessed to pool participants that he had ‘lied’ and that ‘there was no money.’
"In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution to defrauded participants, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws."
Tuberville was a 2008 inductee to the Arkansas Sports Hall of Fame. According to the organization, Tuberville began coaching as a graduate assistant with Larry Lacewell, then the head coach at Arkansas State University. He joined the coaching staff at Miami in 1983, and later helped coach Texas A&M. He got his first head coaching job at Ole Miss 1995, and two seasons later was named Southeastern Conference Coach of the Year.
A year later, Tuberville took the head coach job at Auburn, going on to earn National Coach of the Year honors in 2004 with his team going 13-0. For five of six years, Auburn won the SEC West division and enjoyed a winning streak of 22 out of 25 games.
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