For Release: January 18, 2007
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced the entry of a permanent injunction order in the U.S. District Court for the Southern District of Florida against defendants Next Financial Services Unlimited, Inc. (Next Financial), New World Trading, LLC (New World), Russell Diaz, Shad Thomas Haynes, and Robert LaRocca. The order, among other things, prohibits defendants from engaging in any commodity-related activity, including commodity trading and soliciting customers to invest in commodity futures and options.
The court’s order, entered on January 11, 2006, stems from a CFTC complaint filed on June 21, 2004 (see CFTC News Release 4945-04, June 29, 2004), which charged defendants with fraudulently soliciting customers to trade illegal, off-exchange foreign currency (forex) option contracts. Subsequently, on June 20, 2005, the CFTC filed an amended complaint adding Diaz and Haynes as defendants and charging them with liability for the fraud committed by the firms.
The settlement order finds that the defendants, from at least September 2003 through at least June 2004, fraudulently solicited nearly $3.4 million from at least 199 retail customers in and outside the United States to invest in options on foreign currency. The order finds further that the defendants misrepresented the profit potential and risk involved in trading forex options, as well as misrepresented the level of trading experience of Next Financial and New World employees.
Specifically, according to the order, a prospective customer was told that there was “limited risk” and that a return of 300% to 400% return could be earned, despite a finding in the order that 93% of Next Financial and New World customers lost substantially all of their investments, with total losses to customers of both firms of at least $3 million. Based on trading for customers, Next Financial and New World earned commissions totaling at least $845,300 and $473,500, respectively.
In addition to imposing on all defendants a permanent ban on all commodity-related activity, the order requires 1) Next Financial and Russell Diaz (as the controlling person of Next Financial responsible for the day-to-day operations) to pay defrauded customers more than $1.8 million in restitution, 2) Next Financial to pay a $1 million civil monetary penalty, and 3) Diaz to pay individually a $250,000 penalty.
As to New World and Shad Thomas Haynes (the controlling person of New World responsible for the day-to-day operations of the firm), the order requires them to pay nearly $1.3 million in restitution to customers. Finally, the order requires that New World pay a $1 million civil monetary penalty and Haynes pays individually a $125,000 penalty.
The following CFTC Division of Enforcement staff were responsible for this action: Michael J. Otten, Gretchen Lowe, and Vince McGonagle.
Last Updated: July 25, 2007