October 02nd, 2024
WASHINGTON, D.C. — The Commodity Futures Trading Commission has filed a complaint in the U.S. District Court for the Southern District of New York against Kenneth Newcombe of California, the former chief executive officer and majority shareholder of a Washington, D.C.-based carbon credit project developer, charging fraud and false, misleading, or inaccurate reports relating to voluntary carbon credits. The CFTC also issued orders filing and settling charges against Washington, D.C.-based CQC Impact Investors LLC (CQC) and against Jason Steele, CQC’s former chief operating officer. These are the first CFTC actions for fraud in the voluntary carbon credit market.
Newcombe Complaint
The complaint against Newcombe alleges from at least 2019 to at least in or about Dec. 2023, Newcombe, while CEO and majority shareholder of a carbon credit project developer, engaged in a fraudulent scheme that involved reporting false and misleading information to at least one carbon credit registry and third-party reviewers, among others. The complaint alleges Newcombe did so in order to present a misleading impression of the quality of the project developer’s emissions-reduction projects to obtain carbon credits far beyond what the company was entitled to receive, and which the carbon credit project developer could and did sell to others.
The CFTC seeks civil monetary penalties, disgorgement of ill-gotten gains, restitution, permanent trading and registrations bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.
CQC Order
The CQC order finds from in or after 2019 to at least Dec. 2023, CQC engaged in a deceptive scheme relating to projects it developed purportedly intended to reduce carbon emissions, such as by installing more efficient cookstoves or LED light bulbs in sub-Saharan Africa, Asia, and Central America. Based on information CQC reported to at least one carbon credit registry and third-party reviewers, among others, CQC sought and received issuances of carbon credits that CQC could and did sell to other participants in the voluntary carbon credit market. As found in the order, CQC fraudulently reported false, misleading, and inaccurate information in connection with the verification and issuance of carbon credits, which resulted in the issuances of millions more carbon offset credits than CQC was entitled to receive. According to the order, CQC’s fraudulent conduct involved certain of the company’s former executives, supervisors, and operations and compliance personnel.
The order requires CQC to pay a $1 million civil monetary penalty, cease and desist from violating the applicable provisions of the CEA and CFTC regulations, and comply with certain conditions and undertakings, including the cancelation or retirement of voluntary carbon credits sufficient to address the violative conduct. CQC admitted the findings of the order and acknowledged that its conduct violated the CEA and CFTC regulations.
The order recognizes CQC’s substantial cooperation with the Division of Enforcement and CQC’s representations of its remediation, such as terminating, replacing or separating from individuals responsible for the violative conduct, and notes CQC’s substantial cooperation and appropriate remediation is further reflected in the form of a reduced civil monetary penalty.
Jason Steele Order
The Steele order finds, while COO of the project developer, he intentionally participated in the project developer’s providing false and misleading information to at least one carbon credit registry and third-party reviewers, among others, for the purpose of presenting a misleading impression of the quality of the cookstove projects, wrongfully increasing the number of carbon credits a project would produce. Steele admitted the findings of the order and acknowledged that his conduct violated the CEA and CFTC regulations.
The order recognizes Steele entered into a formal cooperation agreement with the Division of Enforcement. back...
Newcombe Complaint
The complaint against Newcombe alleges from at least 2019 to at least in or about Dec. 2023, Newcombe, while CEO and majority shareholder of a carbon credit project developer, engaged in a fraudulent scheme that involved reporting false and misleading information to at least one carbon credit registry and third-party reviewers, among others. The complaint alleges Newcombe did so in order to present a misleading impression of the quality of the project developer’s emissions-reduction projects to obtain carbon credits far beyond what the company was entitled to receive, and which the carbon credit project developer could and did sell to others.
The CFTC seeks civil monetary penalties, disgorgement of ill-gotten gains, restitution, permanent trading and registrations bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.
CQC Order
The CQC order finds from in or after 2019 to at least Dec. 2023, CQC engaged in a deceptive scheme relating to projects it developed purportedly intended to reduce carbon emissions, such as by installing more efficient cookstoves or LED light bulbs in sub-Saharan Africa, Asia, and Central America. Based on information CQC reported to at least one carbon credit registry and third-party reviewers, among others, CQC sought and received issuances of carbon credits that CQC could and did sell to other participants in the voluntary carbon credit market. As found in the order, CQC fraudulently reported false, misleading, and inaccurate information in connection with the verification and issuance of carbon credits, which resulted in the issuances of millions more carbon offset credits than CQC was entitled to receive. According to the order, CQC’s fraudulent conduct involved certain of the company’s former executives, supervisors, and operations and compliance personnel.
The order requires CQC to pay a $1 million civil monetary penalty, cease and desist from violating the applicable provisions of the CEA and CFTC regulations, and comply with certain conditions and undertakings, including the cancelation or retirement of voluntary carbon credits sufficient to address the violative conduct. CQC admitted the findings of the order and acknowledged that its conduct violated the CEA and CFTC regulations.
The order recognizes CQC’s substantial cooperation with the Division of Enforcement and CQC’s representations of its remediation, such as terminating, replacing or separating from individuals responsible for the violative conduct, and notes CQC’s substantial cooperation and appropriate remediation is further reflected in the form of a reduced civil monetary penalty.
Jason Steele Order
The Steele order finds, while COO of the project developer, he intentionally participated in the project developer’s providing false and misleading information to at least one carbon credit registry and third-party reviewers, among others, for the purpose of presenting a misleading impression of the quality of the cookstove projects, wrongfully increasing the number of carbon credits a project would produce. Steele admitted the findings of the order and acknowledged that his conduct violated the CEA and CFTC regulations.
The order recognizes Steele entered into a formal cooperation agreement with the Division of Enforcement. back...
