UPDATE: South Carolina Pastor Sued By CFTC In Forex Ponzi Scheme Case Now Facing Criminal Charges Of Bank Fraud

Ronald E. Satterfield, the South Carolina pastor accused in a November lawsuit filed by the CFTC of operating a Forex Ponzi scheme from church property and elsewhere, now has been arrested on criminal charges of bank fraud.

The Charleston Police Department confirmed Satterfield’s arrest yesterday to the PP Blog. The arrest occurred Thursday, according to the department. The Charleston Post and Courier broke the news about the arrest and jailing of Satterfield, and the newspaper supplemented its coverage by publishing a PDF of a strange, potentially damning letter Satterfield wrote to a federal judge in November.

Satterfield, 63, was the rector and pastor of St. John’s Reformed Episcopal Church in Charleston. The church property traces its roots to 1850, 10 years before Abraham Lincoln was elected President of the United States and 11 years before the first shots were fired in the Civil War.

In November, the CFTC accused Satterfield in civil filings of being part of a $3.3 million solicitation fraud and Forex Ponzi scheme that operated in part from the historic church facility. Co-defendant Nicholas Bos, a pitchman from Ludington, Mich., was accused of selling the scheme with a business card that depicted a “one million dollar bill” and presenting it as an opportunity to earn “24% a year.”

Bos was paid at least $550,000 in commissions or fees from the scheme, CFTC said. His overall compensation exceeded $800,000 because Bos also received a separate allocation of $295,000 to purchase a home, according to court filings.

If the allegations are true, it means Bos alone received about 40 percent of the proceeds of the alleged scheme.

In court filings in the CFTC case, Satterfield said he did not “agree” with the agency’s charges, asserting he had no intent to defraud and suggesting that economic factors beyond his control and “greed” were to blame for the collapse of the program.

“Some began to see this almost like an automatic ATM mechanism from which to draw a deluded sense of endless money,” he advised U.S. District Judge Richard M. Gergel in a letter.

Despite the fact the CFTC had accused him of never registering with the agency in “any capacity,” instructing participants “to make their investment checks payable to him personally” and commingling their money with his money, he advised Gergel that customers had been dutifully advised by the alleged scheme’s pitchmen not to spend more than they could afford to lose.

Although Satterfield said customers were encouraged by the pitchmen to conduct “due diligence,” he did not explain how it was possible to do so in an environment the CFTC had described as filled with “fraudulent misrepresentations” and omissions of material facts customers needed to make informed investment decisions.

Satterfield claimed he traded Forex between 3 a.m. and 6 a.m., went back to bed until 8 a.m., and then resumed trading until 10 a.m. or 11 a.m.

Mixing Forex trading with his ministry worked well, he said, because most church activities were in the afternoon or evening. And because Forex is a 24-hour activity, he advised Gergel, he had the “ability to respond even in the morning hours if a pastoral need or commitment emerged.”

In a possible bid to prove to Gergel that he was a competent trader — despite the fact the CFTC had said his trading “typically resulted in a loss each month,” that “some or all” of his customers were not eligible participants and that he had misappropriated customer funds — Satterfield prepared a copy of a Forex “demo account” he opened after the CFTC brought its charges. The “demo account” was part of an “exhibit” Satterfield, who claimed to have no money to hire an attorney, presented the judge.

“Sir, I beg the mercy of the court,” he advised the judge. He also told Gergel that Bos received $823,136 from the alleged scheme, which the CFTC said had gathered about $3.3 million from about 70 customers.

Satterfield said that $295,000 of the compensation Bos received was in a form of a loan “to purchase a retirement home,” claiming that Bos had pledged to repay the loan “within a few days” but never did.

The failure to repay the loan, Satterfield said, crippled his ability to trade with “adequate leverage.”

Although CFTC had alleged that the $295,000 came from customer funds , Satterfield did not explain how providing the loan was a prudent business practice. Instead, he focused on the alleged failure of Bos to repay the loan, saying the failure had an “overwheming impact” on his ability to trade.

The scam operated “at least” between March 2006 and March 2009, CFTC alleged.

Police now say Satterfield forged documents in September 2006 to take out a loan for $250,000 in the name of the church. Citing police documents, the Post and Courier reported that Satterfield transferred the money from the church account to his personal account in September 2010, two months before the CFTC brought its civil charges.

In its lawsuit, CFTC said Satterfield used customer funds to make monthly payments to his church that totaled more than $28,000. Because the sum allegedly came from fraud proceeds, the church could be forced to return it and to incur even higher costs because of the sudden need to hire an attorney to guide it through the post-Ponzi waters, which often are choppy.