DEFENDANTS ORDERED TO PAY $2.2 MILLION FOR INVOLVEMENT IN FOREIGN CURRENCY PONZI SCHEME

FROM:  COMMODITY FUTURES TRADING COMMISSION 
An Ohio Federal Court Rules against Defendants in CFTC Fraud Action and Orders Patrick Cole and Global Strategic Marketing, Inc. to Pay over $2.2 Million in Sanctions in Connection with Foreign Currency Ponzi Scheme

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that Judge David D. Dowd Jr. of the U.S. District Court for the Northern District of Ohio granted summary judgment and issued a Memorandum Opinion, a Judgment Entry, and a permanent injunction Order (collectively Order) against Defendants Patrick Cole of Ontario, Canada, and his company, Global Strategic Marketing, Inc. (GSM) in a CFTC enforcement action and finds that the Defendants committed fraud in connection with a multi-million dollar off-exchange foreign currency (forex) Ponzi scheme (see CFTC Release 5921-10, October 7, 2010).

The court’s Order, issued February 26, 2014, imposes disgorgement of $1,146,399 and also requires Cole and GSM to pay civil monetary penalties of $1,146,399. The Order further imposes permanent trading and registration bans on Cole and GSM, and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.

Specifically, the court’s Order finds that in marketing a fraudulent forex investment program offered by another Defendant, Complete Developments, LLC (CDL), GSM recklessly made repeated false statements including claims about low risk of loss; guaranteed return of principal; high rates of return on investment; and purported experience of CDL’s forex trading team. The Order further finds that GSM made the false statements based on information from CDL principal, Defendant Kevin Harris, and that GSM did not independently verify the accuracy of that information. The Order also finds that GSM made false statements about its own conduct, including telling potential investors that GSM had done its “homework” regarding CDL, when in fact GSM had not verified the accuracy of its representations to potential investors.

The Order finds that GSM’s misrepresentations to potential investors were false, misleading, and material and that GSM’s conduct, including not conducting adequate due diligence about GSM and ignoring investor complaints, establishes that GSM acted with reckless disregard as to whether its statements to potential investors were true. The Order also finds that Cole is liable for GSM’s violations because he controlled GSM and “had actual knowledge of all of GSM’s activities at all levels with respect to CDL, and was the decision-maker regarding GSM’s activities upon which the primary violation of the Act is based.”

In May 2013, the court entered a Judgment requiring Defendants CDL, its principals and controlling persons Kevin Harris, Keelan Harris, and Karen Starr, and Defendant Investment International Inc., to pay over $23 million in civil monetary penalties and restitution in connection with this fraudulent forex Ponzi scheme

OWNERS AND COMPANY ORDERED TO PAY OVER $1.8 MILLION FOR PARTS IN FOREX PONZI SCHEME

FROM: COMMODITY FUTURES TRADING COMMISSION

Federal Court Orders North Carolina Residents Timothy Bailey and Michael Hudspeth, and their Company, PMC Strategy, LLC, to Pay over $1.8 Million for Fraud in Foreign Currency Ponzi Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained federal court orders requiring Defendants Timothy Bailey of Monroe, North Carolina, Michael Hudspeth, formerly of Statesville, North Carolina, and their company, PMC Strategy, LLC (PMC), to pay over $1.8 million for solicitation fraud and misappropriation in connection with an off-exchange foreign currency (forex) Ponzi scheme that solicited at least $669,000 from more than 22 individuals

Judge Graham C. Mullen of the U.S. District Court for the Western District of North Carolina entered an Order of Default Judgment and Permanent Injunction against Defendants PMC and Bailey on October 18, 2012, requiring PMC and Bailey jointly to pay over $429,700 in restitution to defrauded pool participants. The Order also imposes a civil monetary penalty of $560,000 on PMC and $420,000 on Bailey and permanently bans them from trading and registering with the CFTC. The Order finds that PMC and Bailey violated the anti-fraud provisions of the Commodity Exchange Act (CEA) by fraudulently soliciting pool participants to trade forex, misappropriating pool participant funds, issuing false account statements, and refusing to return pool participant funds. PMC claimed to have earned a profit of $160,000 from January through June 2008 as a result of its forex trading, according to the Order. However, these representations were false, as PMC was not formed until June 18, 2008, and engaged in no forex trading until July 2008. Furthermore, PMC and Bailey sent false monthly profit checks to pool participants purporting to represent profits earned, when in fact PMC incurred trading losses in 15 of the 22 months it traded, and was overall net negative from October 2008 onward, according to the Order.

Subsequently, on April 3, 2013, Judge Mullen granted Summary Judgment against Defendant Hudspeth finding him liable for the same violations of the CEA as Bailey and PMC, and making Hudspeth jointly and severally liable with Bailey and PMC for the $429,700 restitution award previously ordered by the Court. The Order also imposes a $420,000 civil monetary penalty against Hudspeth and permanently bans him from the commodities industry.

The CFTC Division of Enforcement staff members responsible for this case are Eugenia Vroustouris, Michael Loconte, Daniel Jordan, Rick Glaser, and Richard B. Wagner.

TEXAS MAN TO PAY BACK $2.69 MILLION FOR FOREIGN CURRENCY PONZI SCHEME

The following excerpt is from the CFTC website:

“Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent order requiring CFTC defendant Larry Benny Groover of Gunter, Texas, to pay a total of $2.69 million in restitution and a civil monetary penalty for defrauding customers and misappropriating funds in a foreign currency (forex) Ponzi scheme.

The consent order of permanent injunction, entered by Judge Richard A. Schell of the U.S. District Court for the Eastern District of Texas, Sherman Division, on January 4, 2012, also requires Groover and/or his wife, Joanne Groover, named as a Relief Defendant, to disgorge ill-gotten funds totaling $44,890, which Joanne Groover received as a result of her husband’s fraudulent conduct.

The court’s order finds that from June 18, 2008, to February 4, 2010, Groover solicited and received approximately $1.4 million to trade forex and commingled these customer funds with his and his wife’s personal funds. Groover used approximately $647,500 of the solicited funds to trade forex and lost approximately $600,000. Groover misappropriated the remaining customer funds by making payments to past customers with new customer funds and paying for personal expenses, such as health and medical care, cable television, groceries, dining, auto repair, gasoline, and insurance, according to the order. Additionally, the order finds that Groover used customer funds to purchase software and trade publications and to make payments directly to himself and Joanne Groover.

The CFTC thanks the Financial Services Authority of the United Kingdom, the Australian Securities and Investment Commission, the Texas State Securities Board, and the Collin County District Attorney’s Office for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Jeff Le Riche, Jenny Chapin, Jo Mettenburg, Steve Turley, Richard Glaser, and Richard Wagner.”

INDIVIDUAL AND HIS FIRM TO PAY OVER $19 MILLION IN PENALTIES AND DISGORGEMENT

The following excerpt is from the CFTC website: “Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained federal court consent orders resolving its remaining claims against defendants Ray M. White and CRW Management LP (CRW) and relief defendants Christopher R. White and Hurricane Motorsports, LLC, all of Mansfield, Texas. The claims arose from a CFTC complaint filed on March 4, 2009, in the U.S. District Court for the Northern District of Texas, charging the defendants with operating a multi-million dollar off-exchange foreign currency Ponzi scheme (see CFTC Press Release 5626-09, March 5, 2009). The relief defendants were named in the lawsuit because they received funds as a result of the defendants’ fraudulent conduct and had no legitimate entitlement to those funds. One consent order, entered on October 5, 2011, requires defendants jointly and severally to pay $9,548,365 in disgorgement and requires Ray White to pay a $9,548,365 civil monetary penalty. An earlier consent order of permanent injunction, entered by the court on October 1, 2009, resolved liability against defendants and permanently barred defendants from engaging in any commodity-related activity and from registering with the CFTC in any capacity. This earlier consent order found that, from at least November 2006 through at least November 2008, defendants solicited more than $11.9 million from approximately 411 customers for the purported purpose of trading forex. To carry out their scheme, defendants informed customers and prospective customers that, because of CRW’s purported success in trading forex, it would be able to and, in fact, purportedly did generate tremendous returns for customers, ranging between approximately five and eight percent a week (or an annual rate of return between 260 and 416 percent), according to the order. However, CRW never traded forex, and Ray White lost money in his limited forex trading, operated a Ponzi scheme, and misappropriated millions of dollars of customer funds, the order found. Another consent order, entered by the court on September 27, 2011, requires relief defendants Christopher White and Hurricane Motorsports to pay more than $380,000 in disgorgement and to give up their rights to funds and other assets (including certain real estate) held by the court-appointed receiver, Timothy A. Mack. In a related criminal matter, filed in the U.S. District Court for the Northern District of Texas as part of President Barack Obama’s Financial Fraud Enforcement Task Force, Ray White pleaded guilty to one count of commodities fraud and on May 24, 2011, was sentenced to 10 years in federal prison. The CFTC thanks the Fort Worth Regional Office of the Securities and Exchange Commission for its assistance. “