BEFORE THE HEARING BOARD
OF THE
ILLINOIS ATTORNEY REGISTRATION
AND
DISCIPLINARY COMMISSION

In the Matter of:

ANTHONY A. DEMASI,

Attorney-Respondent, 

No. 6273692.

 

Commission No 08 CH 110

FILED -  October 1, 2008

COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorney, Allison L. Wood, pursuant to Supreme Court Rule 753(b), complains of Respondent, Anthony A. Demasi, who was licensed to practice law in the State of Illinois on June 12, 2001, and alleges that Respondent has engaged in the following conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute:

(Misrepresentations and fraud relative to Tsunami Lakeshore's profitability)

1. During the period from May 2003 through July 2005, Respondent was the principal and managing member of Tsunami Capital, LLC ("Tsunami Capital"), which was registered with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor. A commodity pool is where many individuals combine their money and trade futures contracts as a single entity.

2. From October 2002 to September 2006, Respondent, through Tsunami Capital, opened and maintained various commodity futures accounts, two of which were structured as Tsunami Lakeshore Integrated Fund ("Tsunami Lakeshore").

3. In June 2003, Respondent opened one of the Tsunami Lakeshore accounts and began trading with $287,000, which had been pooled and deposited into that account. Respondent, through Tsunami Capital, was the commodity pool operator for the Tsunami Lakeshore account, and the sole authorized signatory on this account. All of the account statements for the Tsunami Lakeshore account were sent to Respondent's office at 455 N. Cityfront Plaza, in Chicago.

4. After June 2003, Respondent managed trades made in the Tsunami Lakeshore account. In 2004, the account had a deficit of $4,425 in its trading, and in January 2005 the account was closed. Respondent knew or should have known the financial condition of the Tsunami Lakeshore account during the period from June 2003 through January 2005, as he was the sole authorized signatory on the account and the account statements for Tsunami Lakeshore were sent to him.

5. Sometime after June 2003, Respondent created, or directed the creation of, a document titled, "Confidential Private Placement Memorandum Tsunami Lakeshore Integrated Fund, LLC" ("Memorandum"), which identified Tsunami Capital as Tsunami Lakeshore's managing member and commodity pool operator, and Respondent as the principal of Tsunami Capital. Respondent created, or caused the Memorandum to be created, to either solicit potential investors and/or to provide information to investors interested in Tsunami Lakeshore.

6. Sometime after June 2003, Respondent created, or directed the creation of, a profit and loss spreadsheet ("profitability spreadsheet"), on Tsunami Capital letterhead, for the Tsunami Lakeshore account, which purported to show that Tsunami Lakeshore's trading had been profitable in all but two months in 2003 and 2004, with rates of return as high as 26.85% in April 2003 and 22.21% in May 2003. The purported statements were false because the Tsunami Lakeshore account was not active in April or May 2003, and it had a deficit of $4,425 in its trading in 2004. Respondent created or caused the profitability spreadsheet to be created, to either solicit potential investors and/or to provide information to investors interested in Tsunami Lakeshore.

7. During the period between December 2004 and January 2005, Respondent engaged in discussions with a potential investor, Brett Simons ("Simons") to invest in Tsunami Lakeshore. Respondent told Simons that Tsunami Lakeshore was a commodity pool trading futures with $6 million invested, with a minimum investment of $50,000. Respondent provided Simons with a copy of the Memorandum and the profitability spreadsheet. When Respondent told Simons that $6 million had been invested in Tsunami Lakeshore, Respondent knew or should have known that that statement was false, because in 2004 Tsunami Lakeshore had a deficit of $4,425. Respondent knew or should have known that the profitability spreadsheet falsely represented the activity and profitability of Tsunami Lakeshore in April and May 2003, because the Tsunami Lakeshore account was not active in April or May 2003.

8. In January 2005, Simons invested $50,000 with Tsunami Capital for the purpose of trading in the Tsunami Lakeshore account.

9. In March 2005, Respondent told Simons that his $50,000 investment was profitable, and based on those representations, Simons invested an additional $100,000 with Tsunami Capital for the purposes of trading in the Tsunami Lakeshore account. Respondent's representations to Simons that his $50,000 investment was profitable was false and known by Respondent to be false because the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

10. Sometime after March 2005, Respondent created, or directed the creation of, an account statement for Tsunami Lakeshore in April 2005, on Tsunami Capital letterhead, which purported to show a 17% profit in the Tsunami Lakeshore account. The purported statement was false because the Tsunami Lakeshore account had been closed since January 2005.

11. In April 2005, Respondent gave Simons a copy of the account statement described in paragraph 10. Respondent knew the statement he tendered to Simons in April 2005 showing a 17% profit in the Tsunami Lakeshore account was a false statement, because the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

12. In April 2005, Respondent made oral representations to potential investors Jay Deutsch ("Deutsch") and Mike Budicak ("Budicak") to the effect that Tsunami Lakeshore had been profitable. As a result of Respondent's representations, Deutsch invested $50,000 in April 2005, and Budicak invested $100,000 in early 2005. Respondent knew that his representations to Deutsch, and to Budicak, were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

13. Sometime after April 2005, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Budicak had profited $11,366 by the end of June 2005. Respondent knew or should have known that the account statements he sent to Budicak were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

14. In or about December 2005, Respondent made oral representations to potential investor Frank Carbonara ("Carbonara") to the effect that Tsunami Lakeshore had been profitable. As a result of Respondent's representations, Carbonara invested approximately $92,000 from his Individual Retirement Account. Respondent knew that his representations to Carbonara were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

15. Sometime after December 2005, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Carbonara had profited $58,000 by the end of March 2007. Respondent knew or should have known that all of the account statements he sent to Carbonara were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.

16. In late 2005, Respondent made oral representations to potential investor Peter Tamuzian ("Tamuzian") that Tsunami Lakeshore had been profitable. In or about February 2006, as a result of Respondent's representations, Tamuzian invested $60,000 from his employee retirement savings account. Respondent knew that his representations to Tamuzian were false since the Tsunami Lakeshore account had been closed since January 2005.

17. Sometime after February 2006, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Tamuzian's investment had earned 7.83% for March 2006. Respondent knew or should have known that the account statements he provided to Tamuzian was false since the Tsunami Lakeshore account had been closed since January 2005.

18. In May 2006, based on the false statements provided to him by Respondent, Tamuzian invested an additional $40,000 to Respondent to invest in the Tsunami Lakeshore account.

19. From at least April 2002 to at least April 2007, by making false oral representations about the profitability of Tsunami Lakeshore and by creating false account statements that reflected profitable track records, Respondent solicited and accepted $16,312,100 from 108 individuals for the purpose of trading financial futures, and used those funds for his own personal purposes.

20. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct;

  2. conduct that is prejudicial to the administration of justice, in violation of Rule 8.4(a)(5) of the Illinois Rules of Professional Conduct; and

  3. conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Rule 770 of the Illinois Supreme Court Rules.

WHEREFORE, the Administrator requests that this matter be assigned to a panel of the Hearing Board, that a hearing be held, and that the panel make findings of fact, conclusions of fact and law, and a recommendation for such discipline as is warranted.

Allison L. Wood
Counsel for the Administrator
One Prudential Plaza
130 East Randolph Drive, Suite 1500
Chicago, Illinois 60601-6219
Telephone: (312) 565-2600
Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:   Allison L. Wood