The promoter and trader of an unregistered commodities pool in Nebraska has been ordered by a federal judge to hand over $387,000 in funds. Michael Welke of Omaha must comply with the injunction after the CFTC implicated him in an alleged Ponzi scheme that defrauded 130 investors out of $4.7 million. Along with Welke, his associates Michael Kratville and Jonathan Arrington are also subject to the agency’s suit.
The CFTC alleges that from 2005 to 2008 Welke, Kratville and Arrington operated a fraudulent commodities scheme centered on futures and foreign currency trading. The trio formed the companies Elite Management Holdings and MJM Enterprises to solicit investors in the Omaha area. Purporting to be veritable wizards in metals and forex, they boasted upwards of 72 to 90% annual returns. Although the venture was formed in 2005, the men claimed they had consistently achieved monthly yields of over 3% since 2002, an unparalleled feat of time travel. All this was due to their supposed development of a special proprietary program that guaranteed stunning profits with no more than 10% risk to investor principal.
Yet according to the CFTC, Welke and friends proved a total flop at trading in a bull commodities market, ultimately losing $3 million of the $4.7 million they had raised from investors. The regulatory authority says they went on to pay out $850,000 in false returns while misappropriating another $700,000 for country club memberships and golf junkets. To sustain the alleged fraud, the team is said to have provided clients with false account statements detailing imaginary gains.
One must at least grant that the MJM trio had a fruitful imagination. Welke’s partner Kratville would regale potential investors with stories of his friendship with Warren Buffett, telling them that the oracle of Omaha’s very own children had entrusted their money to the group. Their company was staffed with nine out of ten of the world’s top traders, crack specialists who worked around the clock. And best of all, Welke & co. had received several multimillion-dollar offers on their business. None were accepted, however, because MJM sought most of all to “help the small guy get his kids through school and remain entirely proprietary.”
Welke must disgorge $257,000 in fraudulent transfers in addition to paying a $130,000 civil penalty. The CFTC case against Kratville and Arrington is ongoing.
- Company: Elite Management Holdings, MJM Enterprises
- Job: Commodities Trader
- Alleged Scam: Off-Exchange Forex, Metals
- Profits: 36-90% per year
- Ponzi Time: 2005-2008
- Amount of Fraud: $4.7 million
- Evidence: Material Misrepresentations
- Number of victims: 130
- Location: Omaha, NE
- CFTC Complaint: Multiple Violations of Commodity Exchange Act
- Court: U.S. District Court, District of Nebraska