Operator allegedly ran $1M Ponzi while banned from industry

A Michigan commodity pool operator allegedly ran a million-dollar Ponzi scheme, continuing the fraud even after regulators banned him from the industry. 

The Commodity Futures Trading Commission is pursuing Brian Mitchell, Kevin Mack Jr., and their firm Young Pros Investment Group over what regulators describe as a fraudulent commodity pool that cost roughly 33 investors about $1 million. 

Between December 2020 and May 2022, the defendants guaranteed investors monthly returns of 6% to 10% based on account size, with the highest tier promising 10% for balances exceeding $50,000. The investment contracts stated participants would "earn a fixed percentage every month" and promised their principal was "100% guaranteed" against loss. 

But instead of generating profits, Mitchell and Mack lost more than $750,000 of investor money trading e-mini S&P 500 and micro S&P futures contracts, losing money in the majority of months they traded, according to the filing. 

To hide the losses, the operators allegedly sent fake account statements to investors and ran a Ponzi-style scheme, using about $170,000 from new investor deposits to pay purported returns to earlier participants. 

On July 12, 2021, Mitchell and Mack emailed investors claiming the fund had grown to over $2 million in working capital with more than 70 clients receiving collective monthly payouts exceeding $180,000. The regulators say these claims were false. 

By December 2021, the scheme unraveled. Mitchell sent investors an email admitting "we crashed and burned" and that he and Mack "lost the money in the market." He blamed the CFTC for seizing over $800,000 of his assets meant to back investor guarantees. Regulators say no such seizure occurred. 

The case takes on added weight because Mitchell was already under regulatory sanctions. Just months before the alleged fraud continued, in September 2021, the CFTC had ordered Mitchell to stop acting as an unregistered commodity trading advisor, pay a $150,000 penalty, and barred him for at least three years from trading or engaging in any activity requiring registration. 

The filing alleges Mitchell violated that order by continuing to solicit funds and direct trading from September 2021 through at least May 2022. 

The defendants also allegedly commingled investor funds with personal bank accounts and payment apps including PayPal, Zelle, and Cash App, rather than maintaining separate pool accounts as required. 

The CFTC is seeking permanent injunctions, civil penalties, full restitution to investors, disgorgement of profits, and trading and registration bans. The case is pending in federal court in Michigan.