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Dairy me, now the CFTC wants a piece of the $191mn Cowzi scheme

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Check out this CFTC complaint, which just landed in FT Alphaville’s inbox and instantly triggered eye-rolling over America’s premier “don’t forget meeeee” regulator.

As alleged in the complaint, Agridime operated an online platform that purportedly allowed customers to buy and sell cattle and pitched victims with the prospect of guaranteed annual rates of return between at least 15% and 20%. As advertised, Agridime’s cattle purchase program afforded customers the opportunity to buy and sell cattle without the actual day-to-day care of the cattle, or as Agridime stated in solicitation materials, purchasers of livestock would “make money raising cattle without having to do all the work.” 

As further alleged in the Agridime cattle program, customers supposedly bought cattle, typically for $2,000 a head, and Agridime was to handle the feeding and care of the cattle, via farmers with whom Agridime partnered, until the cattle were ready to be processed and the beef sold. 

As alleged in the complaint, Agridime represented the customers’ funds would be used only for the purchase, raising, and feeding of the purchased cattle. Instead, because Agridime did not buy the number of cattle required to fulfill its obligations under the livestock contracts, Agridime had to use recent customers’ funds to pay the guaranteed profits of earlier customers. In addition, as further alleged, upon information and belief, customers’ funds were also used to pay approximately $11 million in undisclosed commissions to Agridime personnel, including to Link, his wife, and Wood.

The SEC already brought a case back in December, when it got a temporary restraining order, asset freeze and the appointment of a receiver at the Fort Worth company. At the time the SEC estimated that Agridime had raised “at least” $191mn from investors. Alex wrote about it here.

Half a year later, the CFTC is suddenly desperate to milk the same case, with the only difference seemingly that it alleges that Agridime received over $161mn between 2021 and 2023 on its online cattle platform (only in America amirite?). Here are the full-fat CFTC charges.

If you’re curious about FTAV’s beef with the CFTC then there’s a condensed summary to skim. And for an overview of what’s at steak, here’s the SEC’s final complaint from last year, which includes this meaty one-two. FT Alphaville’s emphasis below.

2. Since 2021, Agridime has raised at least $191 million from more than 2,100 investors in at least 15 states, selling investment contracts related to the purchase and sale of cattle (“Cattle Contracts”). Defendants promised investors guaranteed annual returns ranging from 15% to 32% and marketed the Cattle Contracts on Agridime’s websites as a way for investors to passively profit from cattle ownership “without having to do all the work.” In advertising, the Defendants boasted, “We know it sounds too good to be true.”

3. Unfortunately for investors, the investment offering was too good to be true. Agridime has used at least $58 million ofinvestor funds-that Agridime represented would be used to purchase, feed, and process cattle-to pay returns to existing investors. Defendants did not buy the number ofcattle required to fulfill the Company’s obligations under the Cattle Contracts, and as a result Agridime has only been able to return principal and pay promised returns by making Ponzi payments. Defendants have never disclosed these Ponzi payments when soliciting new investors. And they have failed to disclose that they have used an additional $11 million to pay 10% commissions to salespeople, including owners Wood and Link, who also solicit investments in Agridime Cattle Contracts.

Beef Magazine reported in February that the case was “progressing”, and Agridime’s website carries a statement that details its receivership and its first quarterly report to the presiding judge, filed on May 1.

It’s not quite FTX level-LOL-everything-is-FUBAR, but it seems Agridime didn’t even know how many cows it had, or how much meat it had stored away in its warehouses.

Company records as to the quantity and location of its cattle were sparse and poorly maintained . . . Unfortunately, the Receiver’s investigation in December 2023 determined that the company had far less cattle than either Mr. Link’s inventory or Agridime’s balance sheet suggested.

. . . Agridime’s balance sheet as of December 11, 2023, claimed that the company had a meat inventory valued at $83,499,938.81. The Receivership quickly determined, however, that this number was not close to accurate.

A full liquidation plan is expected by the end of July. Any bovine puns we missed can go in the comments.

Read the full article here

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