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September 21, 2004
NFA takes enforcement action against Florida commodity pool operator and its principal
September 21, Chicago - National Futures Association (NFA) announced today that it has taken a Member Responsibility Action (MRA) against Longboat Global Funds Management LLC, a commodity pool operator (CPO) and commodity trading advisor (CTA) Member of NFA and Robert Joseph Beasley, a principal and associated person (AP) of Longboat. Longboat and Beasley are both located in Sarasota, Florida. NFA took the action, which is effective immediately, because Longboat failed to demonstrate to the satisfaction of NFA that it accurately reflected the net asset value of Piranha Capital L.P. (a commodity pool operated by Longboat) in the pool's books and records and the reports to its participants.
The MRA prohibits Longboat and Beasley from soliciting or accepting any funds or other things of value from any prospective or existing customer or participant in any pool that Longboat and/or Beasley operate. They are also prohibited from disbursing any funds from any pool trading accounts and any other accounts holding pool funds, and from making any loans of pool funds, or investing in any promissory notes or other debt instruments or in any real estate related investment, without approval from NFA.
Piranha Capital L.P.'s offering memorandum indicated that it would primarily invest in equities and futures and made no mention that it intended to make loans in exchange for promissory notes. Nevertheless, over the past several years, Piranha Capital L.P. has made numerous loans to parties for which it has received promissory notes in exchange. The loans totaling approximately $12 million to several entities were purportedly used to finance real estate projects in the United States and Central America. Nearly $4 million of these loans were made to entities in which Beasley had an ownership interest.
To date, Longboat and Beasley have failed to demonstrate to NFA's satisfaction that the obligors on the notes are credit worthy, that they hold good title to the properties which purportedly secure the notes, or that those properties are unencumbered and marketable. Moreover, the notes' obligors have not made any payments to Piranha Capital L.P. of either principal or interest on any of the notes, except for a partial payment that Beasley made in August 2004 on one of the Beasley related loans, which occurred only after NFA commenced its review of Longboat, Beasley and Piranha Capital L.P.'s activities.
On September 17, 2004, the attorney for Longboat and Beasley advised NFA that Piranha Capital L.P. intended to loan $2.5 million to finance another real estate project in exchange for a promissory note. NFA deemed that such an investment would further reduce Piranha Capital L.P.'s liquid assets and significantly impair the pool's financial ability to honor redemption requests from the remaining pool participants.
The MRA will remain in effect until NFA is satisfied that Longboat and Beasley are in complete compliance with all NFA requirements. Longboat and Beasley may petition the Commodity Futures Trading Commission for a stay of this action and may also request a hearing before NFA's Hearing Committee.
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