CFTC CHARGES ALLEGED FLORIDA PONZI SCHEME OPERATOR WITH FRAUD AND REGISTRATION VIOLATIONS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
April 20, 2015

CFTC Charges Florida Resident Dorian A. Garcia and his Companies, DG Wealth Management, Macroquantum Capital LLC, and UKUSA Currency Fund LP with Fraud and Registration Violations

Garcia Allegedly Operated a Ponzi Scheme in Connection with Forex and Options Pools and Stole Approximately $2.5 Million Invested by Customers

Federal Court Enters Emergency Order Freezing Defendants’ Assets and Protecting Books and Records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Sheri Polster Chappell of the U.S. District Court for the Middle District of Florida entered an emergency restraining Order freezing assets and prohibiting the destruction or concealment of books and records of Defendants Dorian A. Garcia, and his companies, DG Wealth Management (DG Wealth), Macroquantum Capital LLC, and UKUSA Currency Fund LP, all of Naples, Florida. The judge set a hearing date for April 29, 2015.

The Court’s Order arises from a CFTC Complaint filed under seal on April 14, 2015, charging the Defendants with fraud in connection with their solicitation of customers for their foreign currency (forex) and options trading pools, misappropriation of customer funds, and their issuance of false statements and registration violations, in violation of the Commodity Exchange Act and CFTC Regulations.

According to the CFTC Complaint, the Defendants fraudulently solicited approximately $4.7 million from at least 80 customers to invest in forex and options pools beginning as early as May 2010. The Complaint alleges that Garcia made a number of misrepresentations to those he solicited, including: (1) falsely promising them that their principal was protected with a large collateral account; (2) misrepresenting the total amount of funds he had under management; (3) falsely reporting large profits in existing trading accounts; and (4) failing to disclose that he misappropriated investor funds. Many of Garcia’s misrepresentations were contained within bank and trading firm account statements that he emailed to investors that were falsified to reflect exaggerated account balances.

The CFTC Complaint alleges that Garcia returned nearly $2.1 million to investors in a manner akin to a Ponzi scheme and misappropriated approximately $2.5 million of investor funds. Garcia used the misappropriated funds for his personal and business expenses such as art, domestic help, jewelry, and cash transfers to his personal bank accounts, according to the Complaint.

The Complaint also alleges that Garcia and DG Wealth acted in capacities requiring them to register with the Commission, but were not registered with the CFTC, as required.

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

The CFTC appreciates the assistance of the Florida Office of Financial Regulation, Bureau of Financial Investigations, Miami, Florida.

CFTC Division of Enforcement staff members responsible for this case are Susan Padove, Ashley Burden, Mary Elizabeth Spear, Ava M. Gould, Scott R. Williamson, and Rosemary Hollinger.

SEC ALLEGES FORMER REGISTERED REPRESENTATIVE STOLE FROM INVESTOR'S ACCOUNT

FROM:  SECURITIES AND EXCHANGE COMMISSION
SEC Charges Former Registered Representative with Fraud

The Securities and Exchange Commission has charged Kevin P. O'Brien (O'Brien), a former registered representative, with fraud in connection with the misappropriation of over $298,000 from the account of a customer between 1998 and 2008. O'Brien has agreed to settle the charges, without admitting or denying the allegations in the Commission's complaint.

The Commission's complaint, filed February 21, 2014, in the U.S. District Court for the Southern District of Ohio, alleges that, from at least 1998 through August 2008, while working as a registered representative, O'Brien engaged in a fraudulent scheme to misappropriate money from a customer. The complaint alleges that O'Brien caused checks to be issued in the customer's name from the customer's account, picked up the checks from a post office box that he controlled, and deposited them into a bank account in the customer's name. The complaint further alleges that O'Brien withdrew the money from his customer's bank account, which O'Brien had the ability to control, and used the money for personal expenses unrelated to the customer.

O'Brien has consented to the entry of a final judgment that permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The final judgment also orders disgorgement of $298,917, plus prejudgment interest of $54,020, but waives the payment of all disgorgement and all prejudgment interest based upon O'Brien's inability to pay. The Commission also did not seek a civil money penalty based upon O'Brien's inability to pay.

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.

COURT ORDERS $22.8 MILLION IN SANCTIONS AND RESTITTION IN INVESTMENT FRAUD CASE

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court in Florida Imposes over $22.8 Million in a Monetary Sanction and Restitution against Floridian David Merrick and His Company, Trader’s International Return Network

In a parallel criminal action, Merrick was convicted on fraud charges and sentenced to 97 months imprisonment

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Charlene Edwards Honeywell of the U.S. District Court for the Middle District of Florida entered an order requiring defendants David Merrick, previously of Apopka, Fla., and his company, Trader’s International Return Network (TIRN), to jointly pay a civil monetary penalty of over $11.4 million for fraud in connection with a foreign currency trading program that victimized more than 700 customers. The order also requires TIRN, a Panamanian corporation, to pay restitution of $11,437,573 to defrauded customers.

The CFTC order, entered on January 22, 2013, stems from a complaint filed by the CFTC in 2009, charging the defendants with solicitation fraud and misappropriation of customer funds involving at least $22.5 million. The complaint alleged that the defendants provided customers and prospective customers with written and/or electronic documents that contained materially false and misleading statements and omissions regarding the actual investment of customer funds, the risks of trading, and profits achieved (see CFTC Press Release 5733-09, October 15, 2009).

The court previously entered consent orders of permanent injunction against Merrick on April 22, 2010 and TIRN on September 8, 2010, finding that they violated the anti-fraud provisions of the Commodity Exchange Act, as charged. Both orders reserved the issue of monetary sanctions for future order.

In a related criminal case, United States v. David Merrick, No. 10-cr-00109-MSS-DAB (M.D. Fla.), on January 19, 2012, Merrick was found guilty of one count of conspiracy to commit wire fraud, money laundering, and securities fraud and one count of money laundering. He was sentenced to 97 months imprisonment and ordered to pay $11,437,573.15 in restitution to 735 customer-victims.

The CFTC thanks the U.S. Attorney’s Office for the Middle District of Florida, the Federal Bureau of Investigation, and the Securities and Exchange Commission for their assistance in this matter.

CFTC staff members are responsible for the action are William P. Janulis, Barry R. Blankfield, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

COURT GIVES SUMMARY JUDGEMENT AGAINST MISAPPROPRIATOR OF INVESTOR FUNDS

The following excerpt is from the SEC website:

“The Securities and Exchange Commission announced that on December 29, 2011, the United States District Court for the District of Utah granted its motion for summary judgment against Jeffrey L. Mowen. On May 4, 2011, Mowen pled guilty to committing wire fraud in a related criminal action, United States of America v. Mowen, Case No. 2:09-cr-00098-DB (D. Utah). In pleading guilty, Mowen acknowledged operating a Ponzi scheme from around October 2006 to around October 2008, wherein he received over $18 million from investors for use in a purported foreign currency trading program. The SEC Complaint alleges that the investor funds provided to Mowen were raised by Thomas Fry and the other defendants, Fry’s promoters, from the unregistered offer and sale of high-yield promissory notes to over 150 investors in several states. Mowen acknowledged in his guilty plea that, rather than using investor funds for their intended purpose, he used the money for his personal benefit, misappropriating over $8 million.

The SEC moved for summary judgment against Mowen based upon the facts he acknowledged in his guilty plea. The Court granted the SEC’s motion, which sought a finding that Mowen violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933, an injunction against future violations of those provisions, and disgorgement of $8,041,779 in ill-gotten gains, plus prejudgment interest of $1,964,203.”

CFTC ANNOUNCED FEDERAL COURT FREEZES ASSETS OF ALLEGED COMMODITY SCHEME FRAUDSTERS

September 9, 2011 The following is an excerpt from the CFTC website: “Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court in Charlotte, N.C., entered an emergency order freezing assets held by defendants Toby D. Hunter of Waxhaw, N.C., and his companies, Prestige Capital Advisors, LLC (Prestige) and D2W Capital Management, LLC (D2W) of Charlotte, N.C. The court’s order, entered by Judge Max O. Cogburn, Jr., also prohibits the destruction of books and records and grants the CFTC immediate access to such documents. The judge ordered Hunter to appear in court on October 3, 2011, for a preliminary injunction hearing. The order arises out of a CFTC civil complaint filed on September 6, 2011, in the U.S. District Court for the Western District of North Carolina, Charlotte Division. The CFTC’s complaint alleges that, since April 2008, Hunter, Prestige, and D2W fraudulently solicited and accepted funds from the general public to trade pooled investments in commodity futures, options on commodity futures and managed forex accounts. As a result of defendants’ allegedly fraudulent solicitation, at least six individuals invested $4.65 million with the Prestige Multi-Strategy Fund, LP, a pool established by Hunter and Prestige. In addition, the defendants solicited and received $2.36 million in connection with forex trading accounts managed by D2W. Defendants also allegedly misrepresented the profitability of their trading programs by posting false purported returns on a website called BarclayHedge. The complaint further alleges that defendants misappropriated some of the Prestige investors’ funds and issued false account statements to investors in both schemes in order to perpetuate defendants’ fraud. In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws. The CFTC appreciates the assistance of the National Futures Association and the United Kingdom’s Financial Services Authority.”

DEFENDANT AND MANAGED COMPANIES CHARGED IN COMMODITY FUTURES AND FOREX SCHEME

The following excerpt is from the CFTC website: “Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 18, 2011 a federal court in California entered an order freezing the assets of defendants Douglas Elsworth Wilson of Poway, Calif., and three California companies that he controls and manages, Elsworth Berg Capital Management LLC (EBCM), Elsworth Berg Inc., and Elsworth Berg FX LLC (collectively, Elsworth Berg). The order also prohibits the destruction of their books and records. The order arises out of a CFTC civil complaint filed on July 27, 2011 in the U.S. District Court for the Southern District of California. The complaint alleges that the defendants solicited at least $4.4 million from over 60 customers to trade commodity futures contracts and foreign currency (forex). The defendants allegedly misappropriated customer funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme. In connection with their fraud, defendants allegedly misrepresented to customers and prospective customers that regardless of Elsworth Berg’s commodity futures or forex trading results, the return of customers’ investment principal was guaranteed at the end of a five-year period through use of a purportedly innovative “Collateral Reserve” structure, which owned life insurance policies on third-parties. Wilson and EBCM also allegedly issued false statements to some customers that overstated the value of their investments. Wilson and EBCM misappropriated approximately $72,000 in customer funds and used the money for purposes other than trading, according to the complaint. In its continuing litigation against the defendants, the CFTC seeks restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of federal commodities law."