CFTC FREEZES ASSETS IN MISAPPROPRIATION CASE INVOLVING ALLEGED FOREX FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court Freezes Assets of EJS Capital Management, LLC, Alex Vladimir Ekdeshman and Edward J. Servider and Relief Defendants in CFTC Action Charging Misappropriation of Nearly $2 Million in Ongoing Forex Fraud Scheme

Defendant Ekdeshman also charged with violating Federal Court Order

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that The Honorable Kevin P. Castel of the U.S. District Court for the Southern District of New York, on May 1, 2014, entered a restraining order freezing assets and prohibiting the destruction or concealment of books and records of Defendants EJS Capital Management, LLC (EJS), Alex Vladimir Ekdeshman of Holmdel, N.J., and Edward J. Servider of Staten Island, N.Y (collectively Defendants), and of Relief Defendants Alisa Ekdeshman of Holmdel, N.J. (Ekdeshman’s wife), Executive Services of Florida LLC, Executive Management Services of Montana Inc., and Michael Vilner of Sunny Isles Beach, Fla.

The Court’s order arises out of a Complaint filed on May 1, 2014, charging Defendants with fraudulent solicitation of more than $2 million, misappropriation of most of those funds, issuing false account statements, and registration violations in an ongoing retail foreign currency (forex) fraud scheme.

The CFTC also charged that Ekdeshman is in violation of a U.S. District Court Order entered on July 8, 2013, arising out of a prior CFTC action against Ekdeshman where he was charged with solicitation fraud and misappropriating “the vast majority” of customer funds for business expenses. Specifically, the Complaint charged Ekdeshman and Paramount Management, LLC with operating a fraudulent scheme that solicited more than $1.3 million from approximately 110 retail customers to engage in leveraged or margined foreign currency (forex) transactions with unregistered off-shore counterparties. CFTC v. Paramount Management, LLC and Alex Vladimir Ekdeshman, C.A. No. 13-Civ. 4436 (CM) (SDNY Sept. 9, 2013) (see CFTC Press Release 6690-13). The prior court Order against Ekdeshman permanently prohibited Ekdeshman from cheating or defrauding other persons, from soliciting, receiving or accepting funds from any person for the purpose of purchasing or selling forex contracts, and from engaging in any activity requiring registration with the CFTC.

According to the CFTC’s Complaint filed yesterday, between April 2013 and the present, the Defendants fraudulently solicited more than $2 million from at least 90 retail customers. The Complaint alleges that the Defendants misappropriated almost all of the customer funds for their own use, including vacations in Florida and Italy, automobile leases, liquor purchases, employee salaries and commissions, and office rent. The Complaint further alleges that Defendants issued false account statements to customers that listed profits from forex trading although no customer funds were traded in forex and no profits were generated from forex trading. And the Complaint charges that EJS’s website falsely reported that specified EJS trading had been profitable.

The CFTC Complaint also alleges that the Relief Defendants directly and indirectly received funds from EJS bank accounts to which they have no legitimate claim. None of the Defendants or Relief Defendants has ever been registered with the CFTC.

The Court has set a hearing date on the CFTC’s motion for a preliminary injunction for May 12, 2014. In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution for the benefit of defrauded EJS customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

In a criminal action, on May 2, 2014, the U.S. Attorney’s Office for the Southern District of New York announced that it had filed a criminal complaint charging Ekdeshman with one count each of commodities fraud, mail fraud, and wire fraud.  Ekdeshman was arrested in Holmdel, N.J., by agents from the Federal Bureau of Investigation (FBI).

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, the United Kingdom Financial Conduct Authority, l'Autorité des Marchés Financiers du Québec, and the Financial Services Board of the Republic of South Africa.

CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Philip D. Rix, Elizabeth C. Brennan, Steven Ringer, Lenel Hickson, Jr., and Manal M. Sultan.

CFTC REVOKES REGISTRATIONS OF CONVICTED FRAUDSTER AND COMPANY

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Revokes Registrations of Oregon Resident Joshua W. Wallace and His Company, System Capital, LLC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the revocation of the registrations of Joshua W. Wallace, a resident of Oregon, and his Oregon-based company, System Capital, LLC (System Capital). System Capital was registered with the CFTC as a Commodity Trading Advisor and Wallace was registered as an Associated Person of System Capital. Wallace is the sole principal and president of System Capital.

The CFTC filed a civil Complaint against Defendants Wallace and System Capital on November 23, 2010, charging them with solicitation fraud and making false statements to the National Futures Association (NFA) (see CFTC Press Release 5940-10). Subsequently, on March 14, 2013, the U.S. District Court for the Southern District of New York entered an Order of permanent injunction against the Defendants that imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act, as charged. The court’s Order also required Wallace and System Capital each to pay a $420,000 civil monetary penalty.

On December 23, 2013, the CFTC Judgment Officer issued a Decision against Wallace and System Capital, finding that they were statutorily disqualified from CFTC registration based on both the Order of permanent injunction and on the criminal conviction of Wallace on May 21, 2013, in which Wallace pleaded guilty to commodities fraud and was sentenced to serve 27 months in prison (U.S. v. Wallace, 11 crim 124-01 (LTS) (S.D.N.Y.)). The Judgment Officer’s Decision became a final Order of the CFTC on January 22, 2014.

The CFTC thanks the NFA, the Federal Bureau of Investigation, and the U.S. Attorney’s Office for the Southern District of New York for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Mark A. Picard, Elizabeth C. Brennan, Philip Rix, Steven Ringer, Lenel Hickson, and Manal M. Sultan.

COURT ORDERS ACCUSED EMBEZZLER TO PAY $5.2 MILLION

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court Orders North Carolina Resident Michael Anthony Jenkins and his Company, Harbor Light Asset Management, to Pay over $5.2 Million for Solicitation Fraud, Misappropriation, and Embezzlement in a Ponzi Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge James C. Fox of the U.S. District Court for the Eastern District of North Carolina entered an Order for a permanent injunction against Defendants Harbor Light Asset Management, LLC (HLAM) and its President and owner, Michael Anthony Jenkins, both of Raleigh, North Carolina. The Order requires HLAM and Jenkins jointly to pay restitution totaling $1,301,406.60 and a civil monetary penalty of $3,904,219.80. The Order also imposes permanent trading and registration bans against the Defendants and prohibits them from violating the Commodity Exchange Act and CFTC Regulations, as charged.

The Order stems from a CFTC Complaint filed on November 20, 2012 (see CFTC Press Release 6422-12, November 23, 2012), charging HLAM and Jenkins with operating a Ponzi scheme and fraudulently soliciting at least $1.79 million from approximately 377 persons, primarily in North Carolina, in connection with the scheme.

The Order finds that the Defendants made use of an HLAM Investment Agreement to falsely represent to HLAM Investors that their investment funds were used solely for investment in E-mini futures and that the funds would be wired to a specific trading account. To cover up and further the fraud, Jenkins sent spreadsheets and statements that reported false trades, profits, and inflated the value of HLAM’s investments. In addition, the Order finds that Jenkins acted within the scope of his employment by HLAM and committed embezzlement and failed to register with the CFTC as a Futures Commission Merchant.

The CFTC thanks the Securities Division of the North Carolina Department of the Secretary of State for its cooperation and assistance.

CFTC Division of Enforcement staff members responsible for this case are Xavier Romeu-Matta, Nathan Ploener, Christopher Giglio, Lenel Hickson, Jr., and Manal M. Sultan.

COURT ORDERS MAN AND COMPANY TO PAY OVER $2.4 MILLION IN FOREIGN CURRENCY SCHEME

FROM:   COMMODITY FUTURES TRADING COMMISSION 
Federal Court Orders Alex Ekdeshman and Paramount Management, LLC, to Pay over $2.4 million in Restitution and a Fine for Fraudulent Foreign Currency Scheme
Court Order Stems from a CFTC Complaint that Charged Defendants with Solicitation Fraud and Misappropriation of Customer Funds

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent Order against Defendants Alex Ekdeshman of Holmdel, New Jersey, and Paramount Management, LLC (Paramount), requiring them to pay $1,146,000 in restitution to their defrauded customers and a $1,337,000 civil monetary penalty. The Consent Order of Permanent Injunction also imposes permanent trading and registration bans against the Defendants and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.

The Order was entered on September 9, 2013, by U.S. District Judge Colleen McMahon of the Southern District of New York and stems from a CFTC Complaint filed against the Defendants on June 26, 2013. The CFTC’s Complaint charged Ekdeshman, individually and as the agent of Paramount, with solicitation fraud and misappropriating “the vast majority” of customer funds for business expenses. Specifically, the Complaint charged the Defendants with operating a fraudulent scheme that solicited more than $1.3 million from approximately 110 retail customers to engage in leveraged or margined foreign currency (forex) transactions with unregistered off-shore counterparties. The Defendants allegedly advised customers that forex trading accounts would be opened in the customer’s name and would be traded by the Defendants on behalf of the customer.

Furthermore, the Defendants, through a telemarketing sales force and a “Performance Record” linked to their website, touted Paramount’s successful trading record as having yielded an average monthly return of 4.6% over a 20-month period, based on the performance of Paramount’s proprietary trading software system, according to the Complaint.

However, the court’s Order finds that, contrary to the claims made during the solicitations, the Defendants did not manage or trade any customer account, and thus Paramount’s customers neither made actual purchases of any forex nor received delivery of forex. The Order also finds that the Defendants misappropriated all customer funds for Ekdeshman’s personal benefit and failed to disclose to actual or prospective customers that they were misappropriating customer funds. To conceal their fraud, the Order finds that, during all phases of the scheme, the Defendants issued false account statements to their customers, as no individual customer accounts were ever created and no profits were ever generated.

The CFTC appreciates the assistance of the United Kingdom Financial Conduct Authority, the Financial Services Commission Mauritius, and the Financial Services Board of the Republic of South Africa.

Further, the CFTC appreciates the assistance of the Wisconsin Department of Financial Institutions, the National Futures Association, and the Federal Trade Commission.

CFTC Division of Enforcement staff members responsible for this matter are Thomas Kelly, Michael Amakor, Michael Geiser, Melanie Devoe, George Malas, Timothy J. Mulreany, Paul Hayeck, and Joan Manley.

CFTC SETTLES ACTIONS AGAINST DOUGLAS ELSWORTH WILSON AND THREE COMPANIES

FROM: U.S.COMMOITY FUTURES TRADING COMMISSION
CFTC Settles Action against Douglas Elsworth Wilson and Three California Companies for Solicitation Fraud, Misappropriating Customer Funds, and Issuing False Statements in Commodity Futures and Forex Scheme Federal court orders defendants to pay over $5.4 million in restitution and civil monetary penalties

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 9, 2012, a federal court in California entered a consent order that requires defendants Douglas Elsworth Wilson of Poway, Calif., and three companies he controls and manages, Elsworth Berg Capital Management LLC (EBCM), Elsworth Berg Inc., and Elsworth Berg FX LLC (collectively, Elsworth Berg) jointly and severally to pay $3,965,670.71 in restitution to customers as well as a $1.5 million civil monetary penalty. The order also imposes permanent trading and registration bans and permanent injunctions against further violations of federal commodities law, as alleged.

The order follows a CFTC civil complaint filed on July 27, 2011, in the U.S. District Court for the Southern District of California . The order finds that the defendants solicited over $4.4 million from over 60 customers to trade commodity futures contracts and foreign currency (forex). According to the order, the defendants misappropriated customer funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme.

Specifically, the order finds that defendants 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.

The order further finds that Wilson and EBCM 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 order.

The CFTC appreciates the assistance of the California Department of Corporations and the United Kingdom Financial Services Authority (FSA).

The CFTC Division of Enforcement staff members responsible for this case are Theodore Z. Polley III, Melissa Glasbrenner, William P. Janulis, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.