U.S. Agency Sues Two Men in Commodity Fraud Case

Federal regulators have sued two California men who allegedly collected money from investors for speculating in commodity futures and options but instead spent a large portion of the funds on business and personal expenses.

The civil lawsuit, filed this week in U.S. District Court in Los Angeles by the Commodity Futures Trading Commission, alleges that Paulino Rene Dias Jr. of Pollock Pines, Calif., and Victor Smith of Los Angeles committed fraud in connection with the operation of a commodity investment pool.

Woodland Hills-based Krute Corp., of which Dias is a principal, also is named as a defendant.

According to the commission’s complaint, Dias and Smith collected more than $2.4 million from at least 13 investors between November 2001 and October 2002. The money was supposed to be pooled and invested in commodity futures and options, but about $530,000 was misappropriated by the defendants to pay business costs and personal expenses, including several months’ rent on Dias’ apartment, the complaint alleges.

The commission is seeking an injunction against the defendants and is asking the court to impose fines on the defendants and order them to repay investors.

None of the defendants could be reached for comment Friday.