The U.S. Commodity Futures Trading Commission (CFTC) announced that it has filed a complaint in the U.S. District Court for the Northern District of Illinois against Tyche Asset Management, LLC, a Chicago-based operator of registered commodity pools, and Phillip Galles, the company's principal and registered associate. And eight other Tyche entities controlled by Galles. The complaint alleges that Galles and the Tyche entities defrauded more than 50 people across the United States through a Ponzi scheme from October 2019 to the present, raking in more than $6 million.

The CFTC charged Galles and Tyche entities with commodity pool fraud. The complaint alleges that Galles and Tyche Asset Management LLC violated CFTC rules regarding the proper operation of commodity pools and made false and misleading statements to the National Futures Association (NFA).

The CFTC is asking the court to award restitution to the defrauded commodity pool participants, forfeit the defendants' ill-obtained gains and impose a civil penalty on them, and permanently prohibit the defendants from engaging in trading-related industries and impose a permanent injunction against further violations of the CEA and CFTC regulations.

Ian McGinley, director of enforcement at the regulator, said: "As we allege, the defendants used their outlandish experience and knowledge to defraud participants and used their CFTC registration to lie to the regulator, the NFA, to put a veneer of legality behind their fraudulent schemes." In April 2023, when the CFTC learned that the defendants had lied to the NFA, it took swift action to hold the defendants accountable. We are grateful to our staff and our law enforcement partners for their tireless investigations that quickly resolved misconduct that harmed the public."

Background of the case

The complaint alleges that Galles falsely claimed to be a tycoon who managed futures hedge funds, managing billions of dollars through Tyche Asset Management LLC and its affiliated entities. Galles alleges that Tyche traded commodity futures and options on CFTC-regulated markets in recent years, while employing advanced techniques and strategies to generate annual returns of more than 200%.

In reality, however, as alleged in the complaint, Galles misappropriated the participants' funds and organized a Ponzi scheme.

Galles and Tyche almost never used the funds they received from participants to make any trades. Instead, Galles used the funds to fund his lavish lifestyle and continue to promote his false image as a hedge fund mogul.

In addition, Galles and Tyche lied to the NFA in documents that they did not actively solicit or accept client funds. When NFA examiners asked him directly about Tyche's operations in April 2023, Galles persisted in repeating the same lie.