A federal judge in Alabama has frozen the assets of investment companies owned in part by Texas Tech head football coach Tommy Tuberville and Auburn businessman John David Stroud until an April 3 hearing in U.S. District Court in Montgomery.
U.S. District Judge Myron H. Thompson signed the order Wednesday, two days after the U.S. Commodity Futures Trading Commission filed a civil complaint against Stroud, Stroud Capital Management LLC, TS Capital Partners LLC and TS Capital Management LLC.
Court documents filed by the trade commission’s attorneys show Tuberville as more of an investor and silent partner, and Stroud as someone playing up his relationship with the then-head coach for Auburn University to get money from prospective investors.
Stroud’s attorneys based in Montgomery could not be reached for comment Wednesday evening.
The trade commission wants an accounting of all assets and property and until that time, all assets frozen and no trading. The commission also wants payment in penalty of not more than triple the monetary gain for each violation of the Commodity Exchange Act or $130,000 for each violation of the act occurring from Oct. 23, 2004, through Oct. 22, 2008, and/or $140,000 for each violation of the act occurring on or after Oct. 23, 2008.
“While Stroud’s office in Auburn, Ala., displayed numerous items of football memorabilia from Auburn University, where Tuberville had coached football for several years, Stroud ran the daily operations of TSCP, and Tuberville had no commodity futures trading experience and was rarely in the office,” the complaint states. “Many of the prospective participants Stroud solicited during this time trusted Stroud because they were personal friends with him and/or Tuberville.”
Vic Hayslip, a Birmingham-based attorney representing Tuberville, could not be reached for comment Wednesday evening.
Tuberville and Stroud are targets of a separate lawsuit filed in federal court in Montgomery by investors in the companies — some former employees — who want their investments back.
Attorneys for the trade commission assert Stroud founded both TS Capital Partners and TS Capital Management, serving as their chief executive officer and signatory on both their bank accounts. He also solicited funds for the investments pools and is an authorized trader on the pool’s trading accounts.
Court documents also show Tuberville invested funds in the Stroud Capital pool and the TS Capital pool.
Stroud met Tuberville in December 2008 when Tuberville was Auburn’s head coach. Stroud told Tuberville he was employed as a trader at Lehman Brothers, according to court documents.
In early 2009, Stroud told Tuberville he had left Lehman Brothers to run his own investment company, Stroud Capital, and he was successful in trading commodity futures. He asked Tuberville to invest, so the coach invested about $250,000 with Stroud in June 2009, matching what Stroud said he was trading in personal funds, according to court records.
In January 2010 after Tuberville moved to Lubbock to coach at Tech, Stroud continued to use his relationship with the coach, mix up the pools and reel in prospective investors, court documents show. Tuberville left his money in the TS Capital pool and later invested another $200,000 with Stroud in mid-2010, “for a total investment of $450,000 based on Stroud’s representations that he had successfully traded the funds Tuberville had initially invested in commodity futures, particularly natural gas futures.”
About that time, Stroud quit using the fund bearing his name, using the TS funds instead.
In early 2011, Stroud had hired several full-time employees, two of whom invested nearly $670,000 and another who invested nearly $14,000, according to court documents. Stroud wouldn’t show documentation of his trading, so one employee began gathering information and discovered unpaid bills totaling about $85,000 and insufficient funds at a local bank to pay those bills. More investigation uncovered unfiled tax returns, court documents show.
One of the employees told the trade commission Stroud admitted to him “I lied to you, I lied to everyone, and the only way I can make things up to you is to get you your money back,” the complaint states.
Later, Stroud told other participants in the pool he had no money to pay them back.
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