## Facts

- William D. Perkins created and managed Universe Capital Appreciation, LLC as a feeder vehicle to pool investor money and invest it in Shasta Capital Associates, which invested in a futures-trading program (Tech Traders).
- From January 2002 to April 2004, Perkins solicited about $3.4 million from 44 investors and forwarded about $3 million to Shasta.
- Perkins used Shasta offering materials (including a private placement memorandum and promotional performance information) in soliciting Universe investors, many of whom were his tax and accounting clients.
- The CFTC brought a civil enforcement action alleging Perkins (1) acted as an unregistered commodity pool operator (CPO) and (2) committed fraud in connection with operating the pool, violating CEA §§ 4m(1) and 4o(1) and related CFTC regulations.
- Perkins argued Universe was not a commodity pool because it did not execute futures trades; it only transmitted funds to Shasta, which transmitted funds to Tech Traders.

## Issues

1. Whether Universe qualified as a “commodity pool” and Perkins as a “commodity pool operator” even though Universe did not directly trade futures contracts, but invested through intermediary entities that did.
2. Whether Perkins made material misstatements or omissions to investors in connection with the pool in violation of CEA § 4o(1) and related CFTC regulations.
3. Whether summary judgment for the CFTC was proper under Rule 56.

## Decision

- The Third Circuit affirmed the district court’s grant of summary judgment for the CFTC.
- The court held Universe was a commodity pool and Perkins was a CPO subject to CEA registration requirements despite the pool’s indirect, multi-tier investment structure.
- The court upheld liability for failure to register under CEA § 4m(1) and for fraud under CEA § 4o(1) and related CFTC regulations.
- The court concluded Perkins identified no genuine dispute of material fact; his arguments were primarily legal disagreements that did not bar summary judgment.

## Legal Principles

- An entity can be a “commodity pool” when it pools investor funds for the purpose of participating in commodity futures trading, even if trading occurs through intermediaries rather than at the pool level.
- A person who solicits, accepts, or receives funds for participation in such a pooled structure may be deemed a commodity pool operator and must register absent a valid exemption. Failure to register violates CEA § 4m(1).
- CEA § 4o(1) and related CFTC regulations prohibit CPO fraud, including material misstatements and omissions in soliciting or operating a commodity pool.
- Summary judgment is appropriate when the material facts about the investment structure and solicitations are undisputed and the remaining disputes are legal characterizations.

## Conclusion

The Third Circuit affirmed judgment for the CFTC, holding that a feeder-fund structure may constitute a commodity pool and that its manager may be a CPO required to register; it also sustained fraud liability based on misleading solicitations and inadequate disclosures to pool participants.


Commodity Futures Trading Comm’n v. Perkins, 385 F. App’x 251 (3d Cir. 2010)