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Cedar Rapids man faces over $1 million in restitution, penalties for commodities fraud

Trish Mehaffey, CR Gazette –

A Cedar Rapids man and his company, Virtual Vision Inc., will pay more than $1 million in restitution to 11 individuals and a civil penalty for fraudulently soliciting and accepting $975,360 for trading commodity futures through his company.

The U.S. Commodity Futures Trading Commission filed and settled charges Thursday against Jeffrey Kinseth and Virtual Vision, according to a news release. He fraudulently solicited individuals to participate in a pooled investment vehicle (his company), misappropriated investor funds, and provided false statements to conceal trading losses and fraud.

Kinseth wasn’t registered with the commission, which regulates commodity futures and option markets in the United States.

Kinseth will be required to pay a $575,000 civil monetary penalty and restitution of $574,936 to 11 individuals, according to the order.

Dennis Holden, a commission spokesperson, said the commission wouldn’t identify the victims.

According to the order, between March 2008 and September 2009, Virtual Vision, by and through Kinseth, solicited and accepted the $975,360 from 11 individuals to trade commodity futures contracts and leveraged or margined off-exchange foreign currency contracts through Virtual Vision.

Kinseth misappropriated the majority of the funds, more than $800,000, to make payments to other investors and for Kinseth’s personal use, according to the order.

Of the funds traded, Kinseth and Virtual Vision consistently sustained losses and concealed the trading losses and misappropriation by creating and issuing false account statements to investors, according to the order. The false statements showed trading profits.

During this time period in 2009, the Securities Exchange Commission filed investigative subpoenas through U.S. District Court in Cedar Rapids, seeking bank records of Kinseth in connection with investment schemes involving Mazu Publishing Company and Virtual Vision, according to federal court records. The SEC was investigating whether individuals and entities violated federal securities laws by offering or selling securities, including the securities of Virtual Vision, without being registered with the SEC.

The SEC claimed Kinseth was operating an investment scheme through Virtual Vision in either 2008 or 2009, according to federal court records. Kinseth allegedly told investors he would trade their funds in the foreign exchange market. Neither Kinseth or Virtual Vision is registered with the SEC.

The trading commission settlement also permanently prohibits Kinseth and Virtual Vision from being involved in any commodity related activity, including trading and from registering or seeking exemption from registration with the commission.

Assistant U.S. Attorney Peter Deegan said Thursday no civil or criminal charges have been by the office filed against Kinseth.

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