FOREX TRADER TO PAY $819,000 IN COMMODITY POOL FRAUD AND MISAPPROPRIATION CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Orders Pennsylvania Resident Christopher A. Engel and Pinnacle Forex Group LLC to Pay Restitution and a Civil Monetary Penalty Totaling More than $819,000 for Engaging in Commodity Pool Fraud and Misappropriation

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order requiring Respondents Christopher A. Engel and Pinnacle Forex Group LLC (Pinnacle), both of Glen Rock, Pennsylvania, jointly to pay a $414,000 civil monetary penalty and restitution totaling $405,378 to defrauded customers for committing fraud and misappropriation in connection with operating a commodity pool that traded leveraged or margined off-exchange foreign currency contracts (forex).

The Order also requires Engel and Pinnacle to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and permanently bans them from registering, trading, and engaging in other CFTC-regulated activities. Engel owned and operated Pinnacle, and neither Engel nor Pinnacle has ever been registered with the CFTC.

Specifically, according to the Order, from approximately June 2011 to October 2012, Engel falsely told prospective pool participants that Pinnacle managed client accounts worth tens of millions of dollars and that Pinnacle was registered with the CFTC. Also, the Respondents solicited and obtained approximately $414,000 from at least 21 pool participants to participate in a commodity pool to trade leveraged or margined off-exchange forex. However, according to the Order, Engel only deposited approximately $137,000 into forex trading accounts, which he later withdrew and misappropriated. Engel fabricated profits and commissions in statements and emails sent to pool participants to conceal his misappropriation of their funds. Engel used the misappropriated funds to purchase automobiles, a natural foods store, and other personal items, the Order finds. The total loss to pool participants was approximately $405,378, according to the Order.

Additionally, the Order finds that between approximately July 2011 and October 2012, Engel and Pinnacle illegally operated as a Commodity Pool Operator without being registered as such with the CFTC.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Middle District of Pennsylvania, the Federal Bureau of Investigation, and the National Futures Association in this matter.

CFTC Division of Enforcement staff members responsible for this case are Patrick Daly, Michael C. McLaughlin, Patryk J. Chudy, David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.

AUSTRALIAN FIRM RECEIVES PERMANENT INJUNCTION RESULTING FROM FAILING TO REGISTER WITH CFTC

FROM:  COMMODITY FUTURES TRADING COMMISSION 

April 25, 2014

CFTC Obtains a Permanent Injunction against Australian Firm Halifax Investment Services, Ltd., Charged with Acting as an Unregistered Retail Foreign Exchange Dealer

Action is a result of CFTC’s 2012 sweep against foreign currency firms for failure to register under the 2008 Farm Bill, the Dodd-Frank Act, and CFTC regulations

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge James B. Zagel of the U.S. District Court for the Northern District of Illinois issued a Consent Order of Permanent Injunction that bars Australian firm Halifax Investment Services, Ltd. from soliciting orders to trade foreign currency (forex) from United States residents who do not qualify as eligible contract participants (ECPs) and from offering to be the counterparty to United States residents’ forex transactions without registering with the CFTC.

The Order requires Halifax to publish a notice on its website stating that Halifax does not provide services for United States residents. The Order settles CFTC charges that Halifax unlawfully solicited members of the public to engage in forex transactions and operated as a Retail Foreign Exchange Dealer (RFED) without being registered with the CFTC (see CFTC Press Release 6508-13, February 5, 2013).

Specifically, the Order states that between October 18, 2010 and February 5, 2013, Halifax maintained a website that permitted United States residents who were not eligible contract participants to potentially apply to open leveraged forex trading accounts by submitting information online to Halifax’s website.

In the forex market, entities known as RFEDs or Futures Commission Merchants (FCMs) may buy forex contracts from, or sell forex contracts to, individual investors. Under the Commodity Exchange Act and CFTC regulations, an entity acting as an RFED or FCM must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance. Further, with a few exceptions, such an entity also must be registered with the CFTC if it solicits or accepts orders from U.S. investors in connection with forex transactions conducted at an RFED or FCM.

COURT FREEZES ASSETS AND PROTECTS BOOKS IN COMMODITY POOL FRAUD CASE

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
July 12, 2013
CFTC Charges Texas-based RFF GP, LLC, KGW Capital Management, LLC, and Kevin G. White with Commodity Pool Fraud

Federal court issues emergency Order freezing assets and protecting books and records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Eastern District of Texas entered an emergency Order freezing and preserving the remaining pool participants’ assets under the control of Defendants RFF GP, LLC (RFF GP), KGW Capital Management, LLC (KGW Capital), and Kevin G. White, and Relief Defendants Revelation Forex Fund, LP, Meridian Propane LP, and W Corporate Real Estate, LP (d/b/a KGW Real Estate), all of Plano, Texas. The Order also prohibits defendants and relief defendants from destroying books and records, grants the CFTC immediate access to those records, and appoints a temporary receiver to protect pool participants’ funds.

The Order arises out of a civil enforcement Complaint filed by the CFTC on July 9, 2013, charging RFF GP, KGW Capital, and White with fraudulently soliciting at least $5.8 million from at least 20 actual and prospective pool participants to participate in an off-exchange foreign currency (forex) commodity pool and misappropriating at least $1.7 million of pool participants’ funds.

According to the CFTC’s Complaint, the Defendants lured the public to invest by fraudulently telling prospective pool participants that their trading had been profitable, specifically touting compound annual growth rates as high as 37.08% and a total return on investment of 385.84% from 2009 to April 30, 2013. Further, Defendants allegedly told prospective pool participants that White had a 25-year successful career as a Wall Street broker. The Complaint alleges that, in fact, defendants had been losing money since beginning trading, which had not commenced until September 2011. The Complaint alleges further that the Defendants failed to disclose the fact that they had been losing money, that they had been misappropriating pool participants’ funds, that White had been fired from his employment as a broker after a seven-year career in the securities industry, and that White had been both censured and barred by the New York Stock Exchange.

In its continuing litigation, the CFTC seeks a permanent injunction from future violations of federal commodities laws, permanent registration and trading bans, restitution to defrauded pool participants, disgorgement of ill-gotten gains, and civil monetary penalties.

The CFTC appreciates the assistance of the Nevada Office of the Attorney General and the U.S. Securities and Exchange Commission’s Fort Worth, Texas regional office.

CFTC Division of Enforcement staff responsible for this case are Harry E. Wedewer, Dmitriy Vilenskiy, Jeremy Christianson, Rainey Perez, John Einstman, Paul G. Hayeck, and Joan Manley.

OVER $57 MILLION IN SANCTIONS IMPOSED ON TWO MEXICAN COMPANIES FOR FOREX MARKET FRAUD

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court Imposes More than $57 Million in Sanctions against Two Mexican Companies, MXBK Group S.A. de C.V. and MBFX S.A., for Defrauding their U.S. Foreign Currency (Forex) Customers

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court judgment against two Mexican companies, MXBK Group S.A. de C.V. (MXBK), and its forex division, MBFX S.A. (MBFX), requiring them jointly to pay restitution of $28,969,059 to defrauded U.S. customers and an equal amount as a civil monetary penalty. The Order, entered on March 7, 2013, by Chief Judge Ted Stewart of the U.S. District Court for the District of Utah, finds that MXBK and MBFX accepted at least $28 million from more than 800 U.S. customers to trade forex transactions in pooled accounts. The Order finds that MXBK and MBFX defrauded their customers, in part, by misrepresenting their historical trading results. The Order also finds that MXBK and MBFX willfully made, or caused to be made, false reports or statements to their customers regarding the profitability of their accounts.

Specifically, the Order finds, as was alleged in the CFTC’s complaint filed on December 1, 2010, that during the period from June 2008 through April 2009, MXBK and MBFX reported overall trading profits when, in fact, they lost approximately$19.4 million.  
The Order also imposes permanent trading and registration bans against MXBK and MBFX and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.

The CFTC’s enforcement action arose from a joint CFTC cooperative enforcement investigation with the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), and the Securities and Exchange Commission (SEC). On November 30, 2010, the SEC filed a complementary action in the U.S. District Court for the District of Utah (SEC v. Oram), which alleged violations of U.S. securities laws by three U.S. residents alleged to be involved in the MXBK and MBFX enterprise. The SEC case has since settled. The CFTC thanks the FBI, IRS, and the SEC for their assistance.

CFTC Division of Enforcement staff members responsible for this case are William Janulis, Theodore Polley, Melissa Glasbrenner, Elizabeth Padgett, Mary Lutz, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

　

AUSTRALIAN COMPANY SUED BY CFTC FOR UNLAWFUL SOLICITATION

FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Sues Australian Company, Halifax Investment Services, Ltd., for Unlawfully Soliciting U.S. Customers

Washington DC. – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a complaint in the U.S. District Court for the Northern District of Illinois against Halifax Investment Services, Ltd. (Halifax) of Sydney, Australia for soliciting and accepting foreign currency (forex) orders from U.S. customers without registering with the CFTC as required.

In the forex market, entities known as Retail Foreign Exchange Dealers (RFEDs) may buy foreign currency contracts from, or sell foreign currency contracts to, individual investors. Under the Commodity Exchange Act (CEA) and CFTC regulations, since October 18, 2010, with a few exceptions, an entity acting as an RFED that solicits or accepts orders from U.S. customers in connection with forex transactions must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance (see the CFTC’s Forex Currency Trading page).

According to the CFTC complaint, Halifax acts as an RFED and knowingly solicits or accepts orders from non-eligible contract participants (non-ECPs) located in the U.S. without being registered with the CFTC as an RFED. Among other things, the complaint states that Halifax operates a website that permits U.S. customers to open trading accounts by submitting online account applications, and that nothing in Halifax’s online account application states that Halifax does not accept U.S. customers or precludes non-ECPs from opening forex accounts with Halifax.

In its continuing litigation, the CFTC seeks a permanent injunction preventing Halifax from soliciting U.S. customers to buy or sell foreign currency contracts and from operating its website unless and until it complies with the CEA and CFTC regulations, as charged. The complaint also seeks civil monetary penalties, trading and registration bans, disgorgement, and rescission.

The CFTC strongly urges the public to check with the National Futures Association (NFA) whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.

MAN AND COMPANIES CHARGED WITH MAKING FALSE CLAIMS WHILE SOLICITING BUSINESS

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Kaup and his companies, Lunden Forex Partners, LP, Lunden Forex Management, LLC, Black Horse Funds, LLC, Black Horse Management, LLC, and Black Horse Partners, LP, defrauded investors out of almost $1.4 million

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed and simultaneously settled charges against David Kaup of San Gabriel, Calif., and his California-based companies, Lunden Forex Partners, LP, Lunden Forex Management, LLC (Lunden Entities), Black Horse Funds, LLC, Black Horse Management, LLC, and Black Horse Partners, LP (Black Horse Entities). The CFTC charged that they fraudulently solicited individuals with false claims of a profitable trading history for the purpose of trading leveraged or margined off-exchange foreign currency (forex) contracts, misappropriated customer funds, and issued false statements to conceal trading losses and the fraud.

The CFTC order, filed on October 22, 2012, requires Kaup, the Lunden Entities, and the Black Horse Entities jointly and severally to pay a $500,000 civil monetary penalty and restitution of $1,396,316. The order permanently prohibits Kaup, the Lunden Entities, and the Black Horse Entities from engaging in certain commodity-related activities, including trading, and from registering or seeking exemption from registration with the CFTC. The order also permanently prohibits the respondents from further violations of anti-fraud provisions of the Commodity Exchange Act, as charged.

Specifically, the order finds that from about August 2008 through October 2009, Kaup, first through the Lunden Entities and then through the Black Horse Entities, all companies he controlled, fraudulently solicited and accepted at least $1.7 million from at least 24 customers to trade forex contracts. In soliciting potential customers, Kaup falsely claimed that he had a trading track record of earning monthly profits of from 5 percent to 30 percent, provided fraudulent documents to potential customers showing a successful forex trading history, and guaranteed customers monthly profits of from 5 to 10 percent, the order finds. Moreover, the respondents misappropriated customers’ funds to make payments to other customers and to pay Kaup’s personal expenses, the order finds.

Kaup, through the Lunden Entities and the Black Horse Entities, concealed their trading losses and misappropriation of customer funds by assuring customers that their investments were profitable and by issuing false account statements, the order finds. As a result of this scheme, investors were defrauded in the amount of almost $1.4 million.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Pennsylvania Securities Commission, and the Securities and Exchange Commission.

CFTC Division of Enforcement staff members responsible for this case are Mark A. Picard, Philip Rix, Steven I. Ringer, Lenel Hickson, Stephen J. Obie and Vincent A. McGonagle.

COURT FREEZES ASSETS IN FOREIGN CURRENCY TRADING CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION

Federal court issues order freezing defendants’ assets and protecting books and records

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on July 27, 2012, The Honorable Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California entered an emergency order freezing the assets of defendants Victor Yu (Yu) of San Jose, Calif., and his company, VFRS, LLC (VFRS), based in Alameda, Calif. The court’s order also prohibits the destruction or alteration of books and records, and grants the CFTC immediate access to such documents. The judge set a hearing on the CFTC’s motion for a preliminary injunction for August 10, 2012.

The order arises out of a civil enforcement action filed by the CFTC on July 26, 2012, charging defendants Yu and VFRS with defrauding at least 100 clients in connection with off-exchange foreign currency (forex) trading. The CFTC’s complaint also charges Yu with failure to register with the CFTC as a commodity trading advisor (CTA).

According to the CFTC complaint, since at least August 2009 to the present the defendants’ clients invested more than $5 million in forex trading accounts and lost more than $2 million, while defendants received fees of more than $270,000 from their clients.

The defendants allegedly fraudulently solicited clients to open forex accounts that allowed the defendants to place trades in their accounts using trading software that Yu claimed to have developed. Further, defendants misrepresented to clients that the trading software made forex trading “extremely safe,” prevented clients from ever reaching certain loss thresholds, and guaranteed that clients will not have a losing trade, according to the complaint. In addition, defendants allegedly misrepresented to some prospective customers that their trading software had shown positive returns on every trade it had ever made and has successfully predicted activity in the currency markets back to the 1920s.

To solicit new clients, Yu and VFRS, by and through Yu, held face-to-face meetings with prospective clients in various clients’ homes, obtaining leads primarily through word-of-mouth, according to the complaint. Yu allegedly promised existing clients a referral fee or a percentage of any profits earned in the new clients’ forex accounts. When opening accounts, clients signed agreements promising to pay the defendants a service fee of 30 percent of their net profits, and the defendants provided log-in and password information so that clients could “hook up” to the defendants’ trading software. The complaint alleges that by this conduct, Yu acted as a CTA and was required to register with the CFTC.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

WASHINGTON D.C. RESIDENT AND HER COMPANY CHARGED WITH OPERATING FRAUDULENT FOREX SCHEME

FROM:  U.S. COMMODITY AND EXCHANGE COMMISSION
CFTC Charges Washington, DC, Resident Marina Bühler-Miko and Her Company, Coventry Asset Managers, LLC, with Operating Fraudulent Forex Scheme

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in U.S. District Court for the District of Columbia against defendants Marina Bühler-Miko(Bühler-Miko) and her company, Coventry Asset Managers, LLC (Coventry), both of Washington, DC.  The CFTC complaint charges that Bühler-Miko and Coventry fraudulently solicited members of the general public to trade off-exchange foreign currency (forex) contracts on a leveraged or margined basis through a pooled investment vehicle, the Coventry Eire Forex Fund (Coventry Eire).  Neither defendant has ever been registered with the CFTC.

The complaint, filed on May 16, 2012, alleges that from at least June 18, 2008, through April 2011, Bühler-Miko and Coventry defrauded customers of at least $300,000 through their scheme.

In soliciting actual and prospective customers, the defendants allegedly made misrepresentations of material facts, including (1) guaranteeing customer profits of six percent quarterly, plus a bonus payment at the end of the 13-month “Asset Management Agreement” by trading forex in Coventry Eire, and (2) downplaying the risk of entering into leveraged forex transactions.

Bühler-Miko, who had no trading experience, admitted in sworn testimony that no customers received the promised quarterly returns or bonus payments and that she ultimately advised each customer that they had lost nearly all of their principal trading forex contracts through Coventry Eire, according to the complaint.

In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act.
CFTC Division of Enforcement staff responsible for this action are Timothy J. Mulreany, Tracey Wingate, Michael Amakor, Paul Hayeck, and Joan Manley.

COMPANY AND PRINCIPALS CHARGED WITH FRAUDULENTLY RAISING INVESTMENT FUNDS

Photo:  Currency Sign.  Credit:  Wikimedia
FROM:  COMMODITIES FUTURES TRADING COMMISSION
CFTC Charges New York Firm Madison Dean, Inc., and its Principals, George Athanasatos and Laurence Dodge, with Forex Fraud

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Eastern District of New York charging Madison Dean, Inc. (Madison Dean), of Wantagh, N.Y., and its principals, George Athanasatos, also of Wantagh, and Laurence Dodge of Fresh Meadows, N.Y., with fraudulently soliciting approximately 19 persons to invest approximately $415,000 in managed trading accounts to trade off-exchange foreign currency (forex) contracts on a leverage or margined basis. None of the defendants has ever been registered with the CFTC.

The CFTC complaint, filed on May 8, 2012, alleges that from approximately December 2008 through approximately July 2010, defendants Madison Dean, Athanasatos, and Dodge, through an Internet website, written solicitation materials, and other actions, misrepresented and omitted material facts about Madison Dean, including the background and qualifications of Madison Dean employees and the firm’s performance record, to create a false impression that it was a well-established and successful company.

Specifically, according to the complaint, the defendants allegedly fraudulently claimed that 1) Madison Dean had been in existence since 1998, 2) Madison Dean’s customers included high net worth individuals, financial institutions, and institutional clients, 3) Madison Dean provided “professional money managers” who would be in charge of the forex trading for the customers’ managed accounts, and 4) Madison Dean had been making money for its customers for years.

Contrary to these claims, Madison Dean had not been making money for its customers for years, as it did not exist prior to December 2008, and its customers were “neither high net worth individuals, financial institutional or other institutional clients, hedge funds, nor millionaires,” according to the complaint. Also, according to the complaint, Madison Dean did not have professional money managers in charge of customer trading. Rather, Athansatos allegedly managed the trading of customer accounts, and on various occasions, Dodge and Athanasatos’ mother – neither a professional money manager – also traded customer accounts.

The complaint further alleges that Madison Dean’s customers lost approximately $250,000, “as a result of its poor trading.” As further alleged, after being in operation for a little over a year, during which time the firm collected approximately $112,000 in commissions and fees, Madison Dean shut down its operation with no notice to its customers and no way for those customers to contact the company or anyone associated with it.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the Commodity Exchange Act, as charged.
The CFTC appreciates the assistance of the United Kingdom Financial Services Authority in this matter.

CFTC Division of Enforcement staff members responsible for this case are Alan I. Edelman, James H. Holl, III, Michelle Bougas, Gretchen L. Lowe, and Vincent McGonagle.