For Release: January 11, 2007
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Garr King of the United States District Court for the District of Oregon entered an order imposing monetary sanctions against Russell Cline of Portland, Oregon, totaling over $33 million, among other relief. The order stems from a cooperative enforcement effort conducted by the CFTC, the Oregon Department of Consumer and Business Services (State of Oregon),the Federal Bureau of Investigation, and the Department of Justice.
Cline and others were sued by the CFTC and the State of Oregon on May 7, 2003, for engaging in fraud in the sale and solicitation of illegal foreign currency (forex) futures contracts and misappropriating customer funds (see CFTC News Release 4787-03, May 14, 2003).
Specifically, the court’s order requires Cline to make restitution to customers in the amount of $16,567,905, representing the amount of restitution ordered by the court to be paid to certain investors in the criminal action U.S. v. Cline, No. CR-04-205-KI (D.Ore. judgment entered May 8, 2006). In addition, the order imposes a civil penalty of $16,567,905, representing the amount of funds Cline personally misappropriated. Among other things, the order permanently prohibits Cline from directly or indirectly trading commodity futures contracts, options on commodity futures contracts, transactions in foreign currency that are subject to CFTC jurisdiction, and Oregon securities.
Gregory Mocek, the CFTC’s Director of Enforcement, stated:
“This was a massive financial fraud. However, in light of our success in prosecuting retail forex scams over the last four years, we are hopeful that all of those involved in the illegal activity will see that their deceptive business models are becoming less attractive. We were fortunate to be able to work with the State of Oregon and the Office of the United States Attorney to implement strong enforcement of federal and state criminal and civil laws. These cooperative enforcement efforts made a significant impact on the ultimate outcome of this case.”
According to the order, Cline and his company Orion International, Inc. (Orion) orchestrated a scheme starting in December 1998 in which they fraudulently solicited customers to send funds totaling over $40 million to participate in a purported foreign currency fund. Cline fraudulently solicited customers to purchase illegal off-exchange forex options and futures contracts by misrepresenting the profits and risks involved in forex trading. Cline misappropriated much of the customers’ funds to pay for personal expenses, including homes, cars, and entertainment, as well as to pay others who participated in the scheme to defraud Orion’s customers. As part of the scheme, Cline provided customers with false account statements and directed the posting of false information on Orion’s website regarding trading profits, market conditions and opportunities, the balances in individual investor’s accounts, and the reasons for delays in paying customers’ withdrawals. As well, Cline used over $13 million in customer funds to pay other customers fictitious profits on their investments. To the extent that Cline used a small portion of customer funds for trading, he sustained net trading losses.
In May 2004, a federal grand jury in Portland issued a criminal indictment against Cline, charging him with 39 counts of mail fraud, wire fraud, and money laundering based on the conduct alleged in the civil action filed by the CFTC and the State of Oregon. After Cline plead guilty to two counts of mail fraud and one count of money laundering, the court entered judgment on May 8, 2006, sentencing Cline to 97 months in prison and ordering him to pay the aforementioned restitution of $16,567,905. Cline is currently incarcerated and serving his sentence.
On September 7, 2004, the court issued consent orders of permanent injunction imposing civil penalties and customer repayment obligations totaling over $1.3 million against Cline’s codefendants: Nancy Hoyt, April Duffy, and Samantha B. Lewis (f/k/a Bangone Vorachith) of Portland, Oregon (see CFTC News Release 4986-04, September 13, 2004). On June 16, 2006, the court entered an order of permanent injunction against Orion, which imposed a fine of over $86 million and directed Orion to make restitution to customers in the amount of $28,823,034. The order further permanently froze all of Orion’s assets and authorized the court-appointed receiver to make payments to customers from recovered assets.
Last Updated: July 25, 2007