CFTC CHARGES COMPANY AND PRINCIPAL WITH FOREX FRAUD VIA PONZI SCHEME

FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Charges New York Firm 4X Solutions, Inc. and its Principal, Whileon Chay, with Forex Fraud Ponzi Scheme

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action in the U.S. District Court for the Southern District of New York, charging Defendants 4X Solutions, Inc. (4X) and its principal, Whileon Chay, both of New York City, with fraud and misappropriation in a $4.8 million foreign currency (forex) trading Ponzi scheme.

The CFTC Complaint alleges that Chay and 4X fraudulently solicited approximately $4.8 million from at least 19 pool participants by falsely enticing prospective participants with the prospect of earning returns of 24 percent to 36 percent per year and claiming the ability to profit even in adverse market conditions, "when most have lost and lost dearly." At the same time, Defendants minimized the risks of forex trading, claiming, for example, that Defendants had not suffered a single losing month in 14 years and that 4X provides "a safe haven in our current financial environment," according to the Complaint.

The CFTC Complaint also alleges that Chay, who controlled 4X, lost approximately $2 million trading forex in corporate proprietary accounts and misappropriated approximately $2.8 million, using that money to fund 4X’s operations, make purported profit and investment return payments to their customers, and pay for Chay’s personal expenses, including paying for luxury resorts, expensive restaurants, limousine service, and exotic car rentals. The Complaint further alleges that Chay concealed the trading losses and misappropriation by, among other things, issuing or causing to be issued false monthly account statements and checks that purported to represent trading profits and investment returns. All or nearly all of the purported trading profits or returns made by Defendants came from the principal of other participants, the Complaint alleges.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act, as charged.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, August A. Imholtz III, James Garcia, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.

COURT ORDERS CORPORATION AND PRINCIPAL TO PAY $1.4 MILLION TO SETTLE FOREX FRAUD CHARGES

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court in New York Orders Madison Dean, Inc. and Its Principal, George Athanasatos, to Pay over $1.4 Million to Settle Forex Fraud Charges in CFTC Enforcement Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order against Defendants Madison Dean, Inc. (Madison Dean), of Wantagh, N.Y., and its principal, George Athanasatos, also of Wantagh, requiring them jointly to pay nearly $250,000 in restitution to defrauded customers. The Consent Order of Permanent Injunction, entered by Judge Joseph F. Bianco of the U.S. District Court for the Eastern District of New York, also imposes a $1 million civil monetary penalty on Madison Dean and a penalty of $210,000 on Athanasatos. The Order imposes permanent trading and registration bans against both defendants and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.

The Order stems from a CFTC Complaint filed on May 8, 2012, charging Madison Dean, Athanasatos, and another Madison Dean principal, 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 (see CFTC Press Release 6254-12).

The Order finds that Madison Dean and Athanasatos — through an internet website, written solicitation materials, and oral solicitations — misrepresented and omitted material facts about the history of Madison Dean, the performance record of Madison Dean, the nature of the Madison Dean’s clients, and the background and qualifications of the Madison Dean’s employees to create a false impression that Madison Dean was a well-established and successful company. The Order further finds that after being in operation for a little over one year — during which time customers lost approximately $250,000 and Madison Dean collected approximately $112,000 in commissions and fees — Madison Dean shut down its operation with no notice to its customers and no way for customers to contact the company or any of its associates.

The CFTC’s litigation continues against Defendant Laurence Dodge.

The CFTC appreciates the assistance of the United Kingdom’s 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.

CFTC ANNOUNCES EMERGENCY ASSET FREEZE AGAINST COMMODITY TRADING ADVISOR

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges California Resident Victor Yu and His Company, VFRS, LLC, with Multi-Million Dollar Forex Fraud and Failure to Register as a Commodity Trading Advisor

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.

CFTC ORDERS NEVADA COMPANY TO PAY $2.6 MILLION FOR ALLEGED FOREX FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION
CFTC Orders Nevada Resident Luis Salazar-Correa and His Company, Prosperity Team, LLC, to Pay More than $2.6 Million to Settle CFTC Anti-fraud Forex Action
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled charges against Luis Salazar-Correa of Las Vegas, Nev., and his Nevada-based company, Prosperity Team, LLC, for fraudulently soliciting individuals to participate in a pooled investment vehicle, misappropriating customer funds, and issuing false statements to conceal trading losses and the fraud.

The CFTC order requires Salazar-Correa and Prosperity Team jointly and severally to pay a $1 million civil monetary penalty and restitution of $1,641,000. The order permanently prohibits Salazar-Correa and Prosperity Team 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 the Commodity Exchange Act, as charged.

The order finds that from about February 2009 through at least June 2010, Salazar-Correa and Prosperity Team fraudulently solicited and accepted at least $2,482,000 from at least 183 customers primarily for the purpose of trading leveraged or margined off-exchange foreign currency (forex) contracts through a pool investment vehicle, also known as Prosperity Team. In soliciting potential customers, Salazar-Correa falsely guaranteed monthly returns varying from 10 percent to 25 percent, depending on the amount invested, and misrepresented the risks of trading forex, the order finds.

Rather than achieving the claimed returns, the respondents consistently sustained trading losses, which cumulated in overall losses of approximately $1,566,000, and operated a Ponzi scheme by misappropriating customers’ funds to make payments to other customers, the order finds.

Salazar-Correa and Prosperity Team concealed the massive trading losses and their misappropriation of customer funds by issuing false statements, which were accessible to customers online through Prosperity Team’s website, the order finds.

The CFTC appreciates the assistance of the U.S. Attorney’s Office and Federal Bureau of Investigation in Las Vegas, Nev., the U.S. Securities and Exchange Commission, the Cyprus Securities and Exchange Commission, the International Financial Services Commission of Belize, the Swiss Financial Market Supervisory Authority, and the U.K. Financial Services Authority.

CFTC Division of Enforcement staff members responsible for this case are Alison Wilson, Jonathan Huth, Heather Johnson, Brandon Tasco, Gretchen L. Lowe, and Vincent A. McGonag