Tag: Commodity Futures Trading Commission

And people actually are questioning President Obama’s November 2009 decision to create the interagency Financial Fraud Enforcement Task Force when things such as this are going on?

An unregistered North Carolina company that churned tens of millions of dollars in a long-running shell game and described itself as a Forex dealer was operated by a now-convicted felon who worked with another now-convicted felon and told the FBI he never actually traded Forex, the Commodity Futures Trading Commission has alleged in court filings that only can be described as alarming.

Black Diamond Capital Solutions LLC, operated by convicted felon Keith F. Simmons of West Jefferson, N.C., became a cancer on the legitimate Forex landscape, the CFTC charged. The firm and associated companies combined to create a sales force consisting of scammers who ultimately stole from investors and each other, pocketing huge sums to fund businesses not disclosed to investors and to pay for things such as luxury cars, real estate, maid service and sky-diving vacations.

One of the alleged scammers — Deanna Salazar, a purported alternative-investments specialist and the owner of Life Plus Group LLC of Yucca Valley, Calif. — herself is a now-convicted felon. She has been linked to multiple fraud schemes, including a local one in California in which investors allegedly were told they were financing B-movies, and now has been linked by the CFTC to Simmons’ spectacular Forex Ponzi scheme.

Salazar, according to the CFTC, never conducted “any due diligence” on Simmons or his Black Diamond companies. Instead, she simply passed along his bogus claims, including a claim that Simmons used an “exclusive” computerized trading system that had led to an “actual result” of $5,000 turning into $194,340 in three years.

In 2008 alone, according to the bogus “actual” trading results, an account-holder purportedly enjoyed monthly Forex returns that ranged between 4.765 percent and 13.357 percent, according to the CFTC.

Two other alleged Simmons’ associates — Bryan Coats of Clayton, N.C., and Jonathan Davey, a CPA from Newark, Ohio — also blindly followed Simmons and helped him orchestrate the massive Ponzi scheme, the CFTC alleged.

Davey, according to records, organized a Belize company known as Divine Circulation Services Ltd. that assisted Simmons in pulling off the scam, which the CFTC alleged traded on religion. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said.

Coats, meanwhile, was at the head of companies known as Genesis Wealth Management LLC and Genesis Wealth Partners LP, both of Delaware.

Multiple companies with high-sounding names were created by the defendants and either assisted in pulling off the scam or benefited from the scam, the CFTC said. Among the names of the companies were Safe Harbor Ventures Inc., owned by Shari Davey, Davey’s wife, and Safe Harbor Wealth Inc.

Salazar’s husband — Lawrence Salazar — also benefited from the scheme, the CFTC alleged.

All in all, the CFTC charged, the scheme netted at least $35 million from at least 240 investors. It is believed that most if not “all” of the customers were not even eligible to become investors in the purportedly private program because they lacked assets totaling at least $5 million and thus were not “eligible contract participants.”

Adding yet-another layer of the bizarre, Simmons allegedly told the FBI and the CFTC that Black Diamond did not engage in Forex — despite the fact it had gathered tens of millions of dollars by holding itself out as a Forex company and customers received statements showing their purported gains, the CFTC charged.

When the Ponzi began to collapse in early 2009 — and with Black Diamond never having done any actual Forex trading — Salazar, Coats and Davey continued either to work for the firm or to steer business to it, the CFTC alleged.

On March 19, 2009 Simmons sent an email to Salazar and Coats, instructing them that the company “would be shutting down for restructuring” and that all accounts would be liquidated with investors profits paid out, the CFTC alleged.

Incredibly, the CFTC alleged, Simmons claimed a month later — in April 2009 — that Black Diamond’s trading was only hypothetical, despite the fact customers had sent in tens of millions of dollars to conduct real trading and received statements showing their gains.

A months-long round of excuse-making about why customers weren’t getting paid then began, starting with Simmons’ assertion that a restructuring was under way. Coinciding with the restructuring claim were bank statements showing  that Black Diamond had “less than $200,000” in its accounts, the CFTC alleged.

The CFTC, alleging that Simmons had purported to be an active Forex dealer who’d turned $5,000 from one investor into more than $194,000 and then insisted he had not executed a single trade despite issuing account statements showing gains of more than 13 percent a month, then defaulted to a strategy of claiming multiple “accounting reviews” were under way.

He then claimed “excessive withdrawal requests by customers were causing delays in the return of funds.”

Simmons also claimed a “non-existent German liquidity provider by the name of Klaus was attempting to provide $120 million to Black Diamond to payout customers and replace Black Diamond on the purported platform, but his alleged transfer of funds was frozen by bank or regulatory procedures,” the CFTC charged.

At the same time, Simmons said “interventions” by the Federal Reserve, the U.S. Department of the Treasury and the CFTC had led to a situation that made it impossible for Black Diamond to pay customers, the CFTC alleged.

Simmons made excuses from March 2009 through Dec. 17, 2009, the date he was arrested on criminal charges to which he already has pleaded guilty.

Salazar, Coats and Davey strung customers along while Simmons was piling on excuses that were becoming increasingly “complex and outrageous,” the CFTC alleged.

By passing on the excuses after earlier having performed no due diligence — and by continuing to forward the excuses to investors — Salazar, Coats and Davey “recklessly failed to ascertain the cause of the funding problem at Black Diamond” and helped perpetuate lies, the CFTC alleged.

Salazar even helped Simmons shape the lies, according to the CFTC.

In July 2009, Salazar worked with Simmons “to draft the excuse” about why Black Diamond wasn’t making payments, the CFTC charged.

Coats, meanwhile, also worked with Simmons on creating an excuse that payments were not immediately forthcoming because of “stricter capital requirements imposed on our banking system,” the CFTC charged.

Davey informed customers that payouts could not be made because the Federal Reserve had forced Simmons to fill out “anti-money laundering” forms and had frozen $16 million until he completed the task.

In an approach often employed on Ponzi scheme and criminals’ forums such as TalkGold and MoneyMakerGroup, Simmons and Coats warned investors not to contact regulators or attempt to interfere with payment facilitators.

“Simmons threatened certain customers that if they contacted the alleged paymaster, Black Diamond would lose access to the paymaster services and the payout to customers would be jeopardized,” the CFTC alleged.

The agency did not identify the alleged paymasters in the complaint.

And in an act reminiscent of some of developments in the AdSurfDaily Ponzi scheme case, Coats allegedly warned investors that the CFTC was “randomly calling all Forex . . . clients across the America to try and identify possible Madoff scams,” the CFTC alleged.

It was Coats’ “suggestion,” the CFTC alleged, that “members not have any discussions with the Commission.” The suggestion occurred while Black Diamond was refusing to return clients’ money.

In the ASD case, members were urged not to cooperate with the U.S. Secret Service and not to fill out forms that would identify them as victims of a scam.

Salazar, Coats and Davey continued to solicit funds for Black Diamond even though the company was not paying out and was engaged in chronic excuse-making, the CFTC alleged.

Despite assertions that Black Diamond had a miraculous trading platform and expert software developers, “the so-called system developers and the Black Diamond trading platform never existed, the CFTC charged.

Although Salazar’s customers plowed more than $7 million into the scheme — including more than $2 million paid directly to Salazar that was supposed to go to Black Diamond — she “failed to send Black Diamond approximately $1.5 million,” the CFTC charged.

Black Diamond transmitted more than $1.9 million to Salazar, but she returned only $600,000 of that sum to customers and kept $1.3 million for herself, the CFTC alleged.

Of the $2.8 million Salazar cherry-picked in the scam, the CFTC alleged, she used more than $400,000 to purchase cars and took “expensive personal trips.”

Coats’ customers plowed more than $27 million into the scam, and Coats took purported management fees or owner gains of more than $400,000, including about $200,000 after Black Diamond quit paying customers, the CFTC alleged.

Customer funds were used by Coats to acquire an “expensive car,” maid service, home improvements and “a sky diving trip,” the CFTC said.

Davey used customer funds to make $1.3 million in “loans” to his “Sovereign Grace” firm and other companies he controlled. He also bought 47 acres of land and built a “lavish home,” the CFTC charged.