DEFENDANTS IN FOREX FRAUD CASE TO PAY $907,000

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Obtains Permanent Injunction Orders and Monetary Sanctions against Susan G. Davis, David E. Howard II, and Joseph Burgos for Fraudulent Solicitation of Managed Foreign Currency Trading Accounts

Court orders Defendants to pay nearly $907,600 in equitable relief and a monetary sanction and permanently bars them from the commodities industry

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered Consent Orders for permanent injunction against Defendants Susan G. Davis of Jersey City, N.J. and David E. Howard II of New York, N.Y., and a Supplemental Order assessing monetary damages against Defendant Joseph Burgos of Rutherford, N.J. Previously, on October 29, 2013, the court entered a permanent injunction Order against Burgos that imposed permanent trading and registration bans against him. The court’s Orders require Davis, Howard, and Burgos jointly and severally to pay restitution of $407,599.87 for the benefit of defrauded customers and a $500,000 civil monetary penalty, with Davis’s and Howard’s individual liability for the civil monetary penalty limited to $250,000. The Orders also impose permanent trading and registration bans against Davis and Howard and prohibit them from violating the Commodity Exchange Act and CFTC regulations, as charged.

The court’s Orders, entered on February 26, 2014, stem from a CFTC anti-fraud enforcement action filed on July 27, 2011 against Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J., and Davis and Howard, principals of Forex Group and Forex Partners, and Burgos, principal of Highland Stone (see CFTC Press Release 6083-11). The court entered a default judgment against the three companies on November 30, 2012, which ordered them to pay $450,764 for the benefit of defrauded customers and assessed a civil monetary penalty against them of three times that amount, $1,352,293 (see CFTC Press Release 6444-12).

The court’s Orders find that Davis, Howard, and Burgos fraudulently solicited 106 customers, who invested almost $2.9 million to trade foreign currency (forex) through accounts that the Defendants managed at one of two foreign retail forex dealers. In soliciting customers, Defendants falsely claimed on their websites and elsewhere that profits had been made for their customers for a period of several years, including, for example, a false reported gain of 51.94 percent in 2010 when, in fact, their customers lost more than $1.2 million that year. In the end, their customers ended up losing more than 93 percent of their overall invested principal through forex trading, according to the Orders. The court’s Orders also find that the Defendants distributed falsified account statements showing profitable trading to prospective customers. In addition, the court found that Davis, Howard, and Burgos acted in capacities requiring registration with the CFTC, but were not registered.

The CFTC appreciates the assistance of the U.K.’s Financial Conduct Authority.

CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

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CFTC’s Foreign Currency (Forex) Fraud Advisory

CFTC CHARGES TWO MEN WITH MISAPPROPRIATION OF OVER $1.6 MILLION

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges Ron Earl McCullough and David Christopher Mayhew with Fraudulent Solicitation, False Statements, and Misappropriation of More than$1.6 Million of Customer Funds

CFTC Separately Orders Travis Maurice Cox to Pay Restitution and Penalties to Settle Fraud Charges

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action in the U.S. District Court, Eastern District of North Carolina, charging Ron Earl McCullough and David Christopher Mayhew. The CFTC Complaint charges McCullough and Mayhew with fraudulently soliciting, directly and through others, approximately $2.3 million from at least 11 individuals to trade leveraged or margined off-exchange foreign currency (forex) contracts. Further, the CFTC Complaint alleges that McCullough and Mayhew misappropriated at least $1.6 million of their customers’ funds.

In a separate but related matter, the CFTC issued an administrative Order against Travis Maurice Cox that sets forth Cox’s fraudulent conduct in connection with his solicitations on behalf of his forex trading partners.

CFTC Complaint against McCullough and Mayhew

The CFTC Complaint alleges that, from approximately December 2008 until approximately January 2012, McCullough and Mayhew, directly and through others, misrepresented the risks of trading forex; falsely guaranteed the return of customers’ principal; falsely promised high returns, including double returns in short periods of time; and failed to disclose that they intended to use customer funds to pay principal and purported profits to other customers and for personal expenses. During this period, McCullough and Mayhew were residents of Raleigh, North Carolina, according to the Complaint.

The Complaint also alleges that Mayhew caused false account statements to be issued that concealed his and McCullough’s misappropriation, trading losses, and lack of trading, and that McCullough and Mayhew aided and abetted each other’s violations of the Commodity Exchange Act (Act) and a CFTC regulation, as charged.

The Complaint further charges that McCullough and Mayhew misappropriated approximately $808,000 to make purported payments of principal and profits to customers. In addition, McCullough and Mayhew misappropriated approximately $829,000, using their customers’ funds to pay for their own personal expenses, including an online forex trading course and travel expenses.

In its continuing litigation against McCullough and Mayhew, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged.

CFTC Administrative Order against Travis Maurice Cox

According to the CFTC administrative Order as to Cox, a resident of North Carolina, from about August 2009 through December 2011, Cox fraudulently solicited approximately $1.3 million from at least five individuals to trade forex through Cox and his partners. The Order also finds that Cox falsely told his customers that his partners had made money for Cox through forex trading, and that they could be trusted. Cox also represented that all of his customers’ funds would be traded, but failed to transfer all such funds to his partners for trading.

Further, according to the Order, Cox misappropriated approximately $114,000 of his customers’ funds by either failing to deposit that money into forex trading accounts or transferring it to his partners for trading.

The Order requires Cox to make restitution of $1,306,010.95 to his defrauded customers and to pay a $330,000 civil monetary penalty. The Order also requires Cox to cease and desist from further violations of the Act and a CFTC regulation, as charged, and imposes permanent bans on trading, registration, and certain other commodity-related activities.

CFTC Division of Enforcement staff members responsible for this case are Glenn I. Chernigoff, James H. Holl, III, Maura Viehmeyer, Richard A. Glaser, and Gretchen L. Lowe.