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

SEC OBTAINS WIN IN PENNY STOCK FRAUD CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Obtains Summary Judgment Win On Liability Against All Defendants in a Penny Stock Fraud Case

On February 19, 2014, the United States District Court for the Northern District of New York in Albany, New York granted the Securities and Exchange Commission's motion for summary judgment on liability against all defendants, StratoComm Corporation; its CEO Roger D. Shearer; and its former Director of Investor Relations, Craig Danzig, on all charges against them, including violations of the antifraud provisions and registration requirements of the federal securities laws.

The SEC alleged that StratoComm, acting at Shearer's direction and with Danzig's assistance, issued and distributed public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC argued that StratoComm, Shearer and Danzig sold investors more than $4 million worth of StratoComm stock in unregistered transactions. The SEC also alleged that Shearer used much of that money for his own purposes, including to help pay restitution he owed in connection with his guilty plea in a prior criminal proceeding.

In granting summary judgment in favor of the SEC, the court found that StratoComm violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court also found that Shearer violated Sections 5(a) and 5(c) of the Securities Act, aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and found him liable as a control person for StratoComm's violations. Finally, the court found that Danzig violated Sections 5(a), 5(c), and 17(a) of the Securities Act, violated Section 15(a) of the Exchange Act, and aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Statement on Proposed SEC Budget for Fiscal 2015

Statement on Proposed SEC Budget for Fiscal 2015

COURT ORDERS ARIZONA MAN TO PAY OVER $1.2 MILLION STEMMING FROM SOLICITATION FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court Orders Arizona Resident Ray Thomas Brown to Pay over $1.2 Million for Solicitation Fraud and Misappropriation in Operating Two Commodity Scams

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Frederick J. Martone of the U.S. District Court for the District of Arizona granted the CFTC’s motion for summary judgment and entered an Order of permanent injunction against Defendant Ray Thomas Brown, of Phoenix, Arizona. The Order imposes permanent trading and registration bans against Brown and requires him to pay restitution and disgorgement totaling $1,131,941.98 and a civil monetary penalty of $140,000.

The Order stems from a CFTC Complaint filed on November 26, 2012 (see CFTC Press Release 6448-12, December 6, 2012), charging Brown with fraud, misappropriation, and registration violations in operating two scams, one involving fraud while acting as a Commodity Pool Operator (CPO) and the other involving fraud while acting as a Commodity Trading Advisor (CTA). Brown duped customers into sending at least $1.2 million to bank and trading accounts under his control, according to the Complaint. The CFTC Complaint also charged Brown with illegally operating as an unregistered CPO and CTA.

The Order finds that Brown fraudulently solicited approximately $1,163,519 from more than 200 individuals. Of that amount, Brown deposited only approximately $86,000 into commodity pool trading accounts, which was promptly lost in trading. The Order also finds that Brown used the bulk of the funds he solicited on personal expenses and to further his fraudulent scheme. In making his solicitations, Brown lied about his background, fabricated his past and present investment performance, disseminated false account statements, and failed to disclose that he was not registered with the CFTC in any capacity, according to the Order.

A Related Criminal Action

In a related criminal action, Brown pleaded guilty on May 7, 2013, to wire fraud. Brown is currently awaiting sentencing (United States v. Ray Thomas Brown, Case No. 8:13-cr-00035-UA (United States District Court for the Central District of California)).

The CFTC thanks the United States Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Black Mountain Precinct of the Phoenix Police Department, and the Arizona Corporation Commission for their assistance and cooperation on this matter.

CFTC Division of Enforcement staff members responsible for this case are Dmitriy Vilenskiy, Jonathan Robell, Richard Foelber, Paul Hayeck, and Joan Manley.

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.

ALLEGED FUNDS MISAPPROPRIATION GENERATES A GRAND JURY INDICTMENT

FROM:  SECURITIES AND EXCHANGE COMMISSION 
Jeremy Fisher Indicted for Fraud

The Securities and Exchange Commission announced that on February 5, 2014, a Grand Jury in the United States District Court for the Middle District of Florida returned an Indictment charging Jeremy S. Fisher with four counts of wire fraud. The Indictment also seeks forfeiture of property obtained as a result of the alleged criminal violations.

The Indictment alleges that from at least August 2009 through December 2012, Fisher raised approximately $1.04 million from approximately 18 investors who invested in unregistered securities offerings conducted by Fisher through his companies. Fisher offered investors the opportunity to invest their money through a “special trading platform” that supposedly generated significant returns. Fisher told investors that their money would be deposited in an overseas bank account and used as collateral for the purchase and sale of collateralized debt obligations and medium term notes on the trading platform. However, Fisher instead fraudulently misappropriated and converted investors' funds for his personal use to pay previous investors, to purchase a house and car and to pay his daughter's tuition and other personal and business expenses. Fisher also provided quarterly statements to investors which falsely represented that investors were earning money on their investments.

The Indictment's allegations are based on the same conduct underlying the Commission's September 30, 2013 Complaint against Fisher filed in the United States District Court for the Western District of Wisconsin. The Commission charged Fisher and his two companies with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint also charged Fisher with violations of Section 15(a) of the Exchange Act. The defendants entered into consents with the Commission agreeing to the entry by the Court of the relief requested in the complaint, including orders of permanent injunction and disgorgement, plus prejudgment, totaling $936,226 to be paid jointly and severally among the defendants. Fisher has also agreed to pay a civil penalty of $150,000. On October 16, 2013, the Court entered the Final Judgments against Fisher and his companies.