PatrickPretty.com

Tag: Forex fraud

  • BULLETIN: CFTC Moves Against Alleged Texas Forex Fraudster Christopher B. Cornett; Agency Says Huckster Is Convicted Felon Once Banned By NASD; 5 International Law-Enforcement Agencies Assisted In Probe

    BULLETIN: The CFTC has gone to federal court in Texas, alleging that Christopher B. Cornett of the town of Buda was operating a Forex- pool fraud and misappropriation scheme that gathered more than $14 million in phases between June 2008 and October 2011.

    Cornett has been charged civilly with fraud, which allegedly operated through entities the CFTC identified as ITLDU, ICM, International Forex Management LLC and/or IFM LLC.

    “[M]ost, if not all, of the profits, losses and account balances that Cornett reported to pool participants were false,” the CFTC said.

    Five international agencies, according to the CFTC, assisted in the probe: the U.K. Financial Services Authority, the British Virgin Islands Financial Services Commission, the Ontario Securities Commission, Germany’s BaFin, and the Swiss Financial Market Supervisory Authority.

    In 2003, according to the CFTC, the National Association of Securities Dealers (NASD) “barred [Cornett] with association with any NASD member in any capacity” and ordered Cornett to pay restitution in the amount of $28,423.73 for signing a customer’s name on the back of a check and using the funds for Cornett’s personal benefit without the authorization, knowledge or consent of the customer.”

    NASD was the predecessor agency of the Financial Industry Regulatory Authority (FINRA).

    Also in 2003, Cornett was sentenced to 37 months in federal prison after pleading guilty to five counts of bank fraud, the CFTC said.

    Read the CFTC complaint.

     

     

  • SEC Chief Makes Veiled Reference To Imperia Invest Case In Congressional Testimony: Will Ongoing Law-Enforcement Initiatives Spell More Trouble For Serial Online Scammers And Their Enablers?

    SEC Chairman Mary Schapiro

    SEC Chairman Mary Schapiro alluded to the agency’s investigation of the alleged Imperia Invest IBC scam in testimony before Congress this morning, a development that may signal more bad news is in the offing for serial scammers online.

    Without mentioning Imperia by name, Schapiro told members of the House Subcommittee on Financial Services and General Government that the agency, which is a member of the Financial Fraud Enforcement Task Force, participated in “Operation Broken Trust.”

    In December, the U.S. Department of Justice noted that the Imperia case brought by the SEC in October was part of the operation. Imperia was promoted on Ponzi and criminals’ forums such as TalkGold and MoneyMakerGroup, both of which have been identified in federal court filings as places from which family-destroying international Ponzi and HYIP fraud schemes are promoted.

    Schapiro said today that the SEC has been aggressively pursuing “Ponzi scheme operators and perpetrators of offering frauds.” The Imperia case, which the SEC brought in Utah, is an example of an Internet-based offering fraud, as are many of the “programs” pitched on the Ponzi boards.

    In December, members of the Financial Fraud Enforcement Task Force identified Ponzi Scheme "hot spots" in the United States. Pictured here are FBI Executive Assistant Director Shawn Henry (foreground), with Attorney General Eric Holder (right) and Chief Postal Inspector Guy Cottrell. The Task Force specifically warned investors to be wary of social-networking sites and chat forums. And officials noted that "we continue to use sophisticated investigative techniques—like undercover operations and court-authorized electronic surveillance—to collect evidence in ongoing cases and to identify and stop criminals before they prey on others."

    Salt Lake City was identified in December by the Task Force as one of the “top five Ponzi scheme hot spots in the country.” Other Ponzi hot spots include Los Angeles, New York, Dallas and San Francisco, the Task Force said, cautioning Americans that the fraud hardly was limited to those cities.

    “Be wary of people you meet on social networking sites and in chat rooms, where investment fraud criminals have been known to troll for victims,” the Task Force urged.

    In June 2010, the Justice Department used its Justice Blog to create awareness about the emerging threat of mass-marketing fraud, specifically referencing the alleged Pathway To Prosperity Ponzi scheme. Pathway To Prosperity, which the U.S. Postal Inspection Service said created tens of thousands of victims from virtually all corners of the world, also was promoted on TalkGold and MoneyMakerGroup.

    In October, before the public knew Operation Broken Trust was under way, the SEC said Imperia had stolen millions of dollars from thousands of Americans with hearing impairments. The firm used a payment processor known as Perfect Money, a favorite among international scammers who populate the Ponzi boards. Imperia also purported to have a relationship with Visa, but was using the name “without authorization” to disarm skeptical investors, the agency said.

    Not a “single penny” was paid to Imperia investors, the SEC said.

    Money from the Imperia scheme is believed to have been funneled into accounts in Cyprus and New Zealand. Imperia purported to have operated from the Bahamas and Vanuatu, but the business addresses were “fake,” the SEC said.

    The Justice Department said Imperia used “a series of offshore PayPal style bank accounts to raise “in excess of $7 million from at least 14,000 investors worldwide, including 6,000 investors in the U.S. who have invested in excess of $4 million.”

    Earlier this year, the CFTC turned its attention to purported Forex programs that were promoted on TalkGold and MoneyMakerGroup. Some of those programs also used PerfectMoney. Like the SEC, the CFTC is part of the Financial Fraud Enforcement Task Force.

    Tips From The Task Force

    • Be careful of any investment opportunity that makes exaggerated earnings claims, especially during a short period of time.
    • Ask for written information about the investment, such as a prospectus, recent quarterly or annual reports, or an offering memorandum.
    • Consult an unbiased third party, like an unconnected broker or licensed financial adviser, before investing.
    • Don’t be fooled into believing an investment is safe just because someone you know is recommending it. So-called “affinity scams” are one of the favorite methods used to lure people in.
    • If you feel you are being pressured into investing, don’t do it.
    • Be wary of people you meet on social networking sites and in chat rooms, where investment fraud criminals have been known to troll for victims.

  • BULLETIN: CFTC Shuts Down Forex Scam Allegedly Operated In Wisconsin By Canadian Who Claimed Belize Incorporation; Website Of JadeFX Taken Offline; Federal Judge Orders Asset Freeze

    BULLETIN: A Canadian man was running a Forex scheme in the United States that touted its incorporation in Belize, the CFTC said.

    The scheme was operating from Wisconsin Dells, Wisc., and had at least six corporate bank accounts and two PayPal accounts into which customers sent money, the CFTC said.

    Named defendants in a case of solicitation fraud were Jacob Juma Omukwe, JadeFX Ltd. and Jade Investments Group LLC, all of Wisconsin Dells. Omukwe is a citizen of Canada, and the CFTC said that he “misappropriated more than $3.2 million from more than 500 customers in the United States and throughout the world to trade forex.”

    A federal judge has issued an emergency asset freeze. The JadeFX website has been taken offline. Neither Omukwe nor the companies was registered with the CFTC, and the website contained “many contradictory statements that appear to be the product of the Defendants having ‘lifted’ statements from various other websites hosted by legitimate forex dealers,” the CFTC charged.

    The case originally was filed under seal March 1. The seal was lifted after U.S. District Judge William M. Conley of the Western District of Wisconsin ordered an asset freeze and Omukwe consented to a permanent injunction.

    Omukwe told a sea of lies, according to the complaint. Among the lies was a claim that “JadeFX is operated out of Belize and does not conduct business in the United States,” the CFTC charged.

    Between June 2009 an Jan. 27, 2010, Omukwe and his fraudulent companies received more than $400,000 from investors “all over the world,” the CFTC charged.

    “However, during this eight month period, JadeFX had no forex trading account to place forex trades on behalf of customers,” the agency alleged.

    After Jan. 27, 2010, investors plowed more than $3 million into the scheme, and Omukwe kept about $2 million, according to the CFTC.

    Alarmingly, the CFTC added, “In order to foster the false impression that customer money is segregated from that of JadeFX, customers can download a software program from the Defendants’ website that purportedly enables customers to place forex trades in the customer’s account.

    “While Defendants create the appearance of segregated accounts for customers using the software program, in fact no such accounts exist,” the agency continued. “In reality, customers who send funds to the JadeFX or Jade bank accounts have no control over their funds once the money is sent to the Defendants’ bank accounts, which are controlled by Omukwe.”

    And Omukwe also falsely claimed to be “immune” to both U.S. law and laws of the individual states, the agency charged.

    All in all, the agency said, Omukwe had 12 bank accounts as part of the scheme, and used six of them to accept money from U.S. customers.

  • BULLETIN: National Investment-Fraud Sweep Dubbed ‘Operation Broken Trust’ Nets 532 Defendants; AG Holder Says Capers Caused More Than $10 Billion In Losses; ‘Undercover Operations’ Part of Task Force Arsenal

    U.S. Attorney General Eric Holder and members of President Obama’s Financial Fraud Enforcement Task Force said this morning that a nationwide sweep known as “Operation Broken Trust” has netted 343 criminal defendants and 189 civil defendants.

    Among the targets of the sweep were purveyors of Ponzi schemes, affinity fraud, prime bank/high-yield investment scams, foreign exchange (FOREX) frauds, business-opportunity fraud and other similar schemes, investigators said.

    Some of the defendants “filed for bankruptcy in an attempt to avoid claims by victim-investors,” investigators said.

    The combined losses in the schemes, which affected 120,000 investors, were estimated at $10.4 billion, Holder said. He was joined in the announcement by FBI Executive Assistant Director Shawn Henry; U.S. Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami; U.S. Postal Inspection Service (USPIS) Chief Postal Inspector Guy Cottrell;  Deputy Chief Rick Raven of the Internal Revenue Service Criminal Investigation (IRS-CI); Acting Director of Enforcement Vince McGonagle of the U.S. Commodity Futures Trading Commission (CFTC); and other members of the Financial Fraud Enforcement Task Force.

    “With this operation, the Financial Fraud Enforcement Task Force is sending a strong message,” said Holder.  “To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan — we will use every tool at our disposal to find you, to stop you, and to bring you to justice.”

    The calling card of the schemes was greed, Henry said, adding that undercover probes are part of the Task Force’s arsenal.

    “This operation highlights the scope of this problem, and its impact on individuals from all walks of life,” said Henry.  “This one sweep alone involves fraud schemes that harmed more than 120,000 victims. The schemes may change, but the underlying greed does not. Working with our partners, we in the FBI will use all the investigative techniques in our arsenal, including undercover operations, to bring those responsible to justice.”

    Khuzami, meanwhile, said the law-enforcement community was pursuing multiple forms of fraud.

    “Fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard working families and retirees,” said Khuzami. “Victims want justice and don’t much care who the fraudster is or how unique the fraud. Today’s actions underscore that law enforcement agrees and will pursue fraud in whatever form.”

    Read Holder’s announcement, made this morning in Washington.

    President Obama authorized the Financial Fraud Enforcement Task Force in November 2009. In January 2010, Holder ventured to Florida to speak about the aims of the Task Force and to warn scammers that the government was serious about putting them in jail.

  • BULLETIN: ‘Genesis Fund’ Operator John S. Lipton Gets 70 Months In Prison; ‘Offshore’ Forex Scheme Presaged Frauds, Lengthy Global Probes To Come

    UPDATED 2:18 P.M. EDT (U.S.A.) John S. Lipton, an alleged founding member and principal manager of the Genesis Fund Forex Ponzi scheme, has been sentenced to 70 months in federal prison for conspiracy to defraud the United States and tax evasion.

    The Genesis Fund scheme traces its roots at least to 1994 and presaged Forex, HYIP, and autosurf  fraud investigations to come. Indictments were handed up more than five years ago — in May 2005 — and the United States worked with the government of Costa Rica to arrest and extradite some of the defendants.

    Prosecutors said the offshore arrests were coordinated by State Department’s Bureau of Diplomatic Security at the U.S. Embassy in San Jose, Costa Rica, which worked with the IRS attache in Mexico City, the Costa Rican Judicial Police and Interpol.

    Lipton’s prosecution — and the guilty pleas of some codefendants and continuing litigation against others — lay to waste various theories on HYIP Ponzi boards that the U.S. government is powerless to act against offshore schemes and that purveyors of “private” investment opportunities cannot be prosecuted. Part of the scheme featured instructions to participants  “to create nominee offshore corporations and bank accounts to receive distributions from the fund,” prosecutors said.

    Nine people were indicted in the scheme, including Richard B. Leonard. Leonard, who was 71 when arrested in 2005 along with Lipton in Costa Rica, was described as a “promoter” and early investor in the scheme.

    Leonard has pleaded guility to his role in the scheme, as has Teresa R. Vogt, who was 51 when indicted. Vogt was an “administrator” for the scheme and worked out of her California home, prosecutors said.

    Prosecutors said the scheme started in the United States before morphing into an offshore fraud. Genesis Fund allegedly gathered more than $80 million.

    “[T]o obscure the operations of the fund and to limit scrutiny of its operations by investors and the government, the defendants caused the Genesis Fund to maintain no financial statements or other statements of operation,” prosecutors said.

    In April 2000, “Genesis Fund’s administrative operations were relocated from Anaheim, Calif., to Costa Rica,” prosecutors said. “At about the same time, paper records were moved to Costa Rica and electronic data on computers was destroyed.”

    Genesis Fund purported to have “no reporting obligations to the IRS,” prosecutors said. “Bank accounts in the names of trusts and offshore bank accounts were allegedly used to receive distributions from the Genesis Fund that were not reported to the IRS.”

    Prosecutors said “Lipton admitted that he used, and conspired with others to use, foreign trusts, corporations, and bank accounts, to receive distributions from the Genesis Fund and did not report these distributions to the IRS.

    He also “admitted that he directed the transfer of approximately 19 boxes of Genesis Fund documents to Costa Rica, rather than turn them over in response to a grand jury subpoena,” prosecutors said.

    It is common for HYIP and autosurf fraud schemes to claim the ventures are “offshore” and therefore “safe” from prosecution. Some purported HYIP “experts” have repeatedly urged domestic operators to move schemes offshore for the presumptive safety blanket such schemes enjoy.

    Genesis Fund promised investors a return of 4 percent per month, prosecutors said.

    As part of his sentence, Lipton was ordered to pay the IRS nearly $3 million in restitution.

    Trials for four defendants who pleaded not guilty are set for next year. Investigators said they followed the money trail all over the world. Separate trials for the Ponzi aspect of the case also are set for next year.

    “The Genesis fund, [which] operated as a Ponzi scheme, led IRS agents on a financial trail from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations around the world,” Victor S O. Song, chief of the IRS Criminal Investigation Unit, said in April.

    “This signals the new era of solving global financial fraud — the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence,” Song said.

    Genesis ceased paying investors in June 2002, just weeks after claiming the fund was worth $1.3 billion. Investors then “were allegedly lulled into believing that their investments would be recovered through a new investment plan,” prosecutors said.

    It is common for investment fraud schemes to suspend payouts and then claim a new program will emerge to replace a failed one.

    In August 2009, Victor Preston, another defendant in the case, pleaded guilty. Preston, 64 at the time of the indictment in 2005, is an attorney.

    Read more on the indictments in the Genesis Fund case.

  • Peter C. Son Sentenced To 15 Years In Forex Ponzi Scheme That Targeted Korean-Americans; Courtroom Spectator Heckled Scammer, Declaring He Deserved Death For Crime

    A California man accused of bilking Korean-Americans in an $80 million Forex Ponzi scheme was sentenced yesterday to 15 years in federal prison.

    Prior to the sentencing of Peter C. Son of Danville, a courtroom spectator yelled in Korean that “You’ve got to kill that bastard!” according to the San Francisco Chronicle.

    In June 2009, the SEC accused Son, 38, and his business partner, Jin K. Chung, of Los Altos, of targeting Korean-Americans in a scheme in which “funds were not traded in the forex market as claimed.”

    Instead, the SEC said, the funds were used to pay cash “returns” to certain investors in “Ponzi-like fashion” and used to make mortgage payments on Son’s multimillion-dollar home.

    “Supposed” Forex returns were “faked,” and investors were given “monthly account statements showing fictitious returns,” the SEC said.

    Some of the funds were used to pay a $3,000 monthly salary to Son’s wife, who “did no work,” the SEC said. As the scheme was collapsing in 2008, funds were transferred “overseas,” the agency charged.

    Investors were invited to the scheme’s offices purportedly to “view work stations with multiple trading monitors, ostensibly set up to allow . . .  employees to monitor market conditions relevant to forex trading,” the SEC said.

    But representations of Forex success were “false,” and the scheme “conducted little or no forex trading,” the SEC charged.

    The “supposed forex investment program was a fabrication used by Son and Chung to attract investors,” the SEC charged.

    Chung has not been not charged criminally.

    The scheme operated through a company known as SNC Asset Management Inc. (SNCA) of Pleasanton, Calif. It also operated through a company in New York that had a similar name — SNC Investments Inc. (SNCI) — investigators said.

    About 500 investors were defrauded, the SEC said.

    It is not unusual for companies to use multiple names — including confusingly similar names — to pull off a fraud scheme. Nor is it unusual for fraudulent companies to claim they have a local, regional, national or international footprint to disarm skeptical investors.

    Son’s scheme, fueled by advertisements and word-of-mouth, pulled in investors from at least five U.S. states, South Korea and Taiwan, the SEC said. His home in a gated community was valued at $2.6 million, and Son used investors’ money to pay “country club dues,” the agency charged.

    Part of the scheme involved an advertisement that had been altered to appear as through it were an article in Business Week magazine.

    It is common in fraud schemes for operators to imply their product or service is endorsed by famous people or companies. In 2009, members of the failed AdViewGlobal autosurf used the logo of Forbes magazine in a sales promo.

    Separately, members of the alleged AdSurfDaily autosurf Ponzi scheme claimed the program’s operator, Andy Bowdoin, received a special award from the White House for business acumen.

    Read the Son story in the San Francisco Chronicle.

  • CFTC: Convicted Felon Was Running Texas-Based Forex Firm; Robert Mihailovich Sr. And Robert Mihailovich Jr. Charged In Case That Alleges Pattern Of Marketing, Webinar Deception

    Investors turned over more than $30 million to a felon who hid his conviction and even managed to persuade clients to give him power of attorney, the CFTC said.

    Robert Mihailovich Sr. was released from federal prison on June 27, 2007, after serving 21 months for mail fraud, the CFTC said. On Oct. 14, 2008 — while on court-supervised probation — Mihailovich Sr. formed a Texas-based company known as Growth Capital Management (GCM) with his son and namesake, Robert Mihailovich Jr., listed as president.

    Now both father and son are charged civilly with misleading investors and regulatory agencies about GCM’s business practices.

    Mihailovich Jr. is accused of making false statements in regulatory filings and not disclosing that his father was a principal in the firm. Meanwhile, Mihailovich Sr. is charged with fraudulent solicitation.

    Together the father, son and company “fraudulently solicited and accepted more than $30 million from approximately 93 customers,” the CFTC said. Both men reside in Rockwall, Texas.

    Mihailovich Sr. did not disclose his felony conviction to investors, the CFTC charged.

    “There was no disclosure in GCM’s filings concerning Mihailovich, Sr. and/or his involvement with GCM,” CFTC alleged.

    But Mihailovich Sr. “directed the day-to-day business of GCM” and “solicited most, if not all, managed account customers to trade commodity futures and forex,” CFTC charged.

    Mihailovich Sr. used claims about an “electronic trading system” to woo customers on the Internet, the CFTC said.

    Webinars and sales presentations were conducted on Saturdays.

    “Mihailovich, Sr. presented the GCM electronic trading system by employing graphs that purportedly showed trading in live commodity futures accounts and forex accounts,” the CFTC charged. “Mihailovich, Sr. claimed that his GCM electronic trading system virtually guaranteed substantial profits and minimized the risk of loss trading commodity futures and forex. His recurring theme and reassurance was that trading using GCM’s electronic trading system was protected at all times from loss.”

    Actual trading accounts managed and controlled by Mihailovich Sr., however, realized net losses, CFTC said.

    One GCM customer told investigators that Mihailovich Sr. also used a “mass sub-algorithm” to make manual trades and gain extra profits.

    Numerous misrepresentations were made to clients, including a claim that a $1 million investment would result in a $1 million profit and that “it does not matter what the markets do during the trading day for the computerized trading software to make an account profitable,” the CFTC charged.

    Some customers were falsely told that GCM had not closed a trade at a loss since 2000 and that Mihailovich Sr. “had over twenty years of continuous trading experience,” the CFTC charged.

    “Defendants’ marketing materials stated that their software ‘has never closed a managed position at a loss. Not on Forex . . . Not on Bond positions . . . Not on the S&P . . . Or even on the many other types — commodities, stocks and indexes — it has managed over the years,’” CFTC alleged.

    Meanwhile, the agency said Mihailovich Sr. tried to have his felony conviction overturned by claiming ineffective assistance of counsel, “but that petition was denied.”

    Despite claims of safety and assurances that the firm did not lose clients’ money, “approximately half of Defendants GCM’s and Mihailovich, Sr.’s customers lost money from their investments, and overall, their trading resulted in net losses of approximately $2.2 million in customer accounts,” the CFTC alleged.

    “From June 2008 through June 2009, GCM’s and Mihailovich, Sr.’s trading of forex on behalf of customers resulted in overall realized losses of approximately $711,000,” the agency said. GCM and Mihailovich, Sr. received approximately $241,000 in performance and management fees related to this trading.”

    “Between September 2008 and through November 2009, GCM’s and Mihailovich, Sr.’s trading of S&P e-mini futures resulted in realized net losses totaling approximately $1.5 million,” the CFTC said. “GCM and Mihailovich, Sr. received approximately $147,000 in performance and management fees related to this trading.”

    “Despite these mounting losses, GCM and Mihailovich, Sr. continued to solicit new customers by highlighting the profit potential of investing with GCM using GCM’s proprietary trading software, without disclosing the fact that many of their customers lost most, if not all, of their investment,” the CFTC charged.

    Read the CFTC complaint.