<p style= text-align: justify; ><b>09/24/2008</b></p> <p style= text-align: justify; > </p>
<p style= text-align: justify; >According to the U.S. Commodity Futures Trading Commission (”CFTC”), the CFTC has filed an action to revoke the registration of Philadelphia Alternative Asset Management Company, LLC (PAAM) as a Commodity Pool Operator (CPO). The action is based, in part, on fraud judgments entered against PAAM.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The CFTC, in a Notice of Intent to Revoke Registration filed on September 24, 2008, alleges that PAAM is subject to statutory disqualification of its registration as a CPO based on a default judgment entered against PAAM in the U.S. District Court for the Eastern District of Pennsylvania on August 13, 2008 (see CFTC Press Release 5531-08, August 19, 2008).</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The District Court’s August 13, 2008 order found that PAAM, from at least the fall of 2002 through at least May 2005, fraudulently solicited more than $280 million from individuals to participate in a commodity pool that traded commodity futures and options. The order also found that PAAM issued fraudulent trading account statements, misrepresented its trading record to prospective participants, and misappropriated pool funds. PAAM was ordered to pay restitution of approximately $276 million and an $8.8 million civil monetary penalty.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; ><b>08/20/2008</b></p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >According to the U.S. Commodity Futures Trading Commission (”CFTC”) Paul Eustace of Ontario, Canada, was ordered to pay more than $279 million in restitution and a $12 million civil penalty, based on an order that resolves a CFTC enforcement action against him for defrauding commodity pool participants in four pools that he managed.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The court also entered an order of default judgment against the commodity pool operator that Eustace controlled, the Philadelphia Alternative Asset Management Co. (PAAM), imposing permanent trading and registration bans, requiring payment of restitution of approximately $276 million, subject to offset by prior disbursements and payments by Eustace, and imposing an $8.8 million civil monetary penalty.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The supplemental consent order, entered by the Hon. Michael M. Baylson of the U.S. District Court for the Eastern District of Pennsylvania on August 13, 2008, follows a July 13, 2007 consent order of permanent injunction against Eustace that enjoins Eustace from further violations, and imposes permanent trading and registration bans.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >“This concludes a successful effort by our Division of Enforcement to stop fraud in its tracks, return as much money as possible to defrauded investors, and to bring wrongdoers to justice,” said CFTC Acting Chairman Walter Lukken.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The orders arise out of a CFTC complaint filed on June 21, 2005, and later amended, against Eustace and PAAM. (See CFTC Press Release 5091-05, June 29, 2005.)</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >At the outset of the litigation, the CFTC’s action froze all the assets under the control of PAAM and Eustace and preserved more than $70 million for return to pool participants. The CFTC also obtained the appointment of a receiver to recover and distribute funds to defrauded participants. Through related receivership litigation, an additional $96 million has been obtained to date for the benefit of defrauded pool participants. Defendants’ restitution obligation shall be offset by any funds distributed through the receivership.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >As alleged in the amended complaint, and as the 2007 consent order found, from at least the spring of 2001 through June 2005, Eustace fraudulently operated four commodity pools: the Option Capital Fund LP (Option Capital Fund); and, through PAAM, the Philadelphia Alternative Asset Fund, L.P. (LP Fund); the Philadelphia Alternative Feeder Fund LLC; and the Philadelphia Alternative Asset Fund, Ltd., an offshore fund with over $250 million in assets. During this time, Eustace incurred losses of approximately $200 million trading commodity futures and options either in accounts held in the name of the funds or in his name. Eustace concealed those losses by issuing or causing to be issued, false account statements reflecting highly and consistently profitable trading results. Eustace also misappropriated assets of the Option Capital and LP Funds and received incentive and management fees through his fraudulent operation of the pools. Eustace was also charged with fraudulent solicitation and registration violations.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >The CFTC Division of Enforcement appreciates the assistance of the Ontario Securities Commission and the National Futures Association in this matter.</p>
<p style= text-align: justify; > </p>
<p style= text-align: justify; >In December 2007, the CFTC issued a related order filing and settling failure to supervise and recordkeeping charges against MF Global, Inc. (MFG), a registered futures commission merchant, and Thomas Gilmartin, a former associated person of MFG relating to their mishandling of certain trading accounts managed by Eustace and PAAM that sustained losses of approximately $133 million. MFG and Gilmartin paid collectively $2.25 million in civil monetary penalties and Gilmartin agreed never to seek registration with the Commission. (See CFTC Press Release 5427-07, December 26, 2007.)</p>