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CFTC Charges Agridime in Cattle Fraud
Tuesday, May 14, 2024 1:51PM CDT

LINCOLN, Neb. (DTN) -- The U.S. Commodity Futures Trading Commission (CFTC) is seeking restitution for defrauded customers of Agridime LLC, and its co-founders Joshua Link and Jed Wood, as well as civil monetary penalties, a trading ban and permanent injunction against future violations, in a civil enforcement complaint filed in federal court.

The Fort Worth, Texas-based cattle marketing company had its assets frozen in December 2023 after allegations were leveled by the U.S. Securities and Exchange Commission that the company fraudulently sold securities in cattle contracts as part of an alleged $191 million Ponzi scheme.

The CFTC complaint filed in the U.S. District Court for the District of Northern Texas on May 10, 2024, said the company defrauded thousands of customers in at least 14 states.

The scheme included soliciting, accepting and using customers' funds to pay undisclosed commissions and later used customers' funds to pay profits to earlier customers.

"During the relevant period, 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%," the complaint said.

"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.'

"In the Agridime cattle program, the customer supposedly bought a head of live cattle, typically for $2,000, and Agridime was supposed to take care of the actual feeding and caring for the cattle via farmers with whom Agridime partnered, until the cattle were ready to be processed and the beef sold."

The CFTC said the alleged Ponzi scheme occurred from Dec. 1, 2022, to Sept. 30, 2023.

Agridime's actions, CFTC alleges in the new complaint, violated anti-fraud provisions of the Commodity Exchange Act and CFTC regulations. The CFTC said it was concerned Agridime would continue to operate the scheme.

"Unless restrained and enjoined by the court, defendants are likely to continue engaging in the acts and practices alleged in this complaint or in similar acts and practices and funds they have obtained fraudulently may be misappropriated or otherwise dissipated," CFTC said in the complaint.

AGRIDIME PLACED IN RECEIVERSHIP

When the SEC froze Agridime's assets in December 2023, it placed the company under a court-ordered receivership as well.

In the SEC case, both co-owners Link and Wood were dropped as defendants late last month, according to a court filing.

The court-appointed receiver in the SEC case filed a quarterly business report at the end of April detailing some of Agridime's frozen assets and liabilities facing the company. The receiver also looked to stabilize Agridime's operations as well.

Part of the receiver's job also is to reach out to several hundred investors, at least some of whom had substantial savings invested with Agridime on the promise of guaranteed returns, "only to learn that these funds may now largely be gone," the receiver's report stated.

The receiver also highlighted challenges such as locating Agridime's cattle.

Link would typically provide a monthly inventory in an email. The last one in October 2023 reported 17,852 head spread across 18 feed yards in Colorado, Kansas, Illinois and Oklahoma.

That inventory, however, did not match with a balance sheet showing $59.18 million in cattle value. The receiver stated the book value would have indicated Agridime had more than 29,500 cattle on hand.

The receiver's investigation, however, only found about 9,900 head of cattle -- and more than 2,000 of those were not owned by Agridime but placed in feedlots are part of a retained ownership program where ownership did not pass to Agridime until the cattle were sent to slaughter.

At the end of March 2024, Agridime had 5,002 cattle, the bulk of which were larger feeder calves, but also some cow-calf pairs and a few bulls.

Several of the feed yards were then reluctant to share any information about Agridime's inventory as well. The receiver also had to get a court order to make a Kansas feeding operation pay Agridime $128,500 for the proceeds of sold cattle.

Agridime also had claimed last December that it had meat inventory valued at just under $83.5 million but "this number was not close to accurate." The receiver, after conducting an inventory, pegged the value at approximately $20 million.

The receiver also then eliminated 40 jobs and closed various parts of Agridime's businesses not essential to meat sales.

The court receiver, recognizing Agridime is no longer a viable seller of meat products, then asked the court to create a new company, American Grazed Beef LLC, to sell off the inventory of meat products through online sales.

The company created a new website and began selling products in late February, pulling in $250,000 in sales in the first month.

At the end of March, the receiver was in negotiations with a North Dakota-based investor group that wanted to purchase the assets of Agridime and American Grazed Beef. The receiver expects to submit a liquidation plan to the federal court in Texas by the end of July.

AGRIDIME ADVERTISEMENTS

CFTC said by December 2023, Agridime's website no longer referenced the purchase of cattle but instead "claimed that potential investors could work with the company to 'buy or sell your finished cattle'" with Agridime's help in "backgrounding, spot contracts and hedging your calves as finished cattle."

The complaint said Agridime also posted advertisements on YouTube in 2023 that made "false statements regarding cattle purchases, including that all money invested for such purposes would be used for cattle-related expenses."

CFTC said the company used social media to share "false and misleading videos."

The complaint said Agridime "owned an insufficient amount of cattle to support those cattle sales and to fulfill the company's obligations under the livestock contracts. Upon information and belief, as of December 2023, Agridime had less than half of the cattle needed to fulfill its contractual obligations. As a result, Agridime has only been able to return principal and pay promised customer returns by paying customers with new customers' funds."

Agridime solicited customers for its livestock contracts from at least 14 states, including Arizona, Alabama, Arkansas, Colorado, Indiana, Kansas, Kentucky, Maryland, North Dakota, Oklahoma, South Dakota, Texas, Washington and Wisconsin.

In April 2023, the Arizona Corporation Commission issued a temporary cease-and-desist order that barred Agridime and Link, a Gilbert, Arizona, resident, from selling unregistered securities and committing securities fraud.

In May 2023, the North Dakota Securities Commission ordered Agridime and Link to cease selling unregistered securities, acting as an unregistered broker-dealer and "engaging in securities fraud" on livestock contracts.

Agridime did not respond to DTN's request for comment.

Read more on DTN:

"SEC Alleges Beef Co. is Ponzi Scheme," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on social platform X @DTNeeley

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN


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