IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
|COMMODITY FUTURES TRADING COMMISSION,||)||Civil Action No. C00 3202 SI|
|ABDULLA ALSAFARI, a/k/a VINCENT||)||COMPLAINT FOR INJUNCTIVE AND|
ALSAFARI, a/k/a VINCENTA ALSAFARI,
|)||OTHER EQUITABLE RELIEF AND FOR|
|a/k/a VICENTA ALSAFARI, INDIVIDUALLY||)||CIVIL PENALTIES UNDER THE|
|and d/b/a YENTRADING.COM,||)||COMMODITY EXCHANGE ACT,|
|)||AS AMENDED, 7 U.S.C. §§ 1 et seq.|
1. Since at least January 1998, defendant Abdulla Alsafari, a/k/a Vincent Alsafari, aka Vincenta Alsafari , a/k/a Vicenta Alsafari, individually and doing business as Yentrading.com ("Alsafari"), has solicited members of the public to purchase a system to trade in futures contracts in Japanese yen. Alsafari's system interprets computerized information to determine the best price and time at which to buy or sell a particular contract. In the course of his solicitations via the internet, newspaper advertisements, and in workshops at various locations, Alsafari , while operating as a commodity trading advisor, has made and is making material misrepresentations that (1) profits are guaranteed with the use of his foreign currency futures trading system; (2) he is trading foreign currency futures in his own trading account; and (3) he is making profits using his trading system to trade foreign currency futures contracts. Alsafari also misrepresented and continues to misrepresent that (1) purchasers of his trading system can obtain full refunds if their trading is not profitable; and (2) he has never had a request for a refund. By these acts or practices, Alsafari has engaged, is engaging, and is about to engage in various acts or practices in violation of Sections 4b (a)(i)and (iii) and 4o (1) (A) and (B) of the Commodity Exchange Act as amended ("the Act"), 7 U.S.C. §§ 6b(a) (i) and (iii), 6o (1) (A) and (B), and Commission Regulation ("Regulation") 4.41(a) promulgated thereunder, 17 C.F.R. § 4.41(a) (2000).
2. Accordingly, the Commission brings this action to enjoin such acts and practices and to compel compliance with the provisions of the Act and the Regulations. In addition, the Commission seeks a civil monetary penalty, an accounting, disgorgement of unlawfully obtained funds, restitution, and such other ancillary equitable relief as the Court may deem necessary or appropriate under the circumstances.
JURISDICTION AND VENUE
3. This Court has jurisdiction over this action pursuant to Section 6c(a) of the Act, 7 U.S.C. § 13a-1(a), which provides that whenever it shall appear to the Commission that any person has engaged, is engaging or is about to engage in any act or practice constituting a violation of the Act or any rule, regulation, or order thereunder, the Commission may bring an action against such person in the proper District Court of the United States to enjoin such practices, to enforce compliance with the Act, to remove any danger of violation of the Act, and for civil penalties.
4. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. § 13a-1(e), in that Alsafari is found in, inhabits, and transacts business in this district, and the acts and practices in violation of the Act have occurred, are occurring, and are likely to continue to occur within this district, among other places.
5. Plaintiff Commodity Futures Trading Commission, an independent federal regulatory agency of the United States of America, is empowered to enforce the provisions of the Act, 7 U.S.C. §§ 1, et seq., and the Regulations promulgated thereunder, 17 C.F.R. §§ 1.1, et seq.
6. Defendant Abdullah Alsafari, who resides at 835 Maddux Drive in Daly City, California 94015, has never been registered with the Commission in any capacity.
STATUTORY AND REGULATORY BACKGROUND
7. A commodity trading advisor ("CTA") is defined in Section la(5)(A) of the Act, 7 U.S.C. §1a (5) (A), as any person who for compensation or profit, engages in the business of advising others as to the value of or the advisability of trading in: (i) any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of a contract market; (ii) any commodity option authorized under Section 4c of the Act, 7 U.S.C. § 6c; or (iii) any leverage transaction authorized under Section 19 of the Act, 7 U.S.C. §23, or a person who for compensation or profit, and as part of a regular business, issues or promulgates analyses or reports concerning any of the activities referred to above.
8. Since at least January 1998, by means of advertisements in one or more newspapers, Alsafari has solicited members of the public to invest in a system purportedly enabling them to make profits trading futures contracts in Japanese yen ("the System"). These advertisements, some of which were published in the San Francisco Chronicle and San Francisco Examiner, include various guarantees of $900 in daily profits, $10,000 in monthly profits, or $6,000 in monthly income with an investment of $8,000.
9. On July 24, 1998, Alsafari registered his domain name, www.yentrading.com, and thereafter advertised the system on the internet. On September 23, 1999, Alsafari registered a second domain name, www.currencytradingg.com, at which Alsafari has published the same material published at www.yentrading.com.
A. Fraudulent Representations that Alsafari Is Engaged in Trading His Own Account
10. Since July 1998, Alsafari has falsely represented on his website that he has been engaged and continues to be engaged in foreign currency futures trading in his own account, including but not limited to the following representations:
(a) "This trading system is traded daily by the instructor [Alsafari], so all profits and losses generated are from actual trades and NOT simulated representations.... " [Emphasis in text.]
(b) Monthly trading for the period between February 1998 through November 1998 resulted in profits of between $10, 913 and $23,550, and such results were from "actual trading."
(c) Daily and weekly trading for the period December 1998 through January 1999 and daily trading for April 6, 1999 resulted in gross profits of between $87.50 and $1,650 per contract, and such results were "taken from the instructor's [Alsafari's] own trading day."
11. In addition, since January 1998, Alsafari has fraudulently represented during demonstrations of the System at his home and at various hotels, and during telephone conversations with purchasers and prospective purchasers of the System, that he was making actual profits trading pursuant to the System.
12. In fact, since at least January 1998, including the time for which Alsafari reported profits based on the use of the System for trading in his own account, Alsafari never made a single trade in any futures contract. Prior to that time, from the opening of his own trading account with a deposit of $3,500 in July 1997 through December 1997, Alsafari traded Swiss franc and Japanese yen futures contracts and lost all but $337.50 of his initial deposit.
B. Fraudulent Guarantees and Other Misrepresentations Concerning Trading Profits
13. Alsafari has, on his website, guaranteed that purchasers of the System will make money trading pursuant to the System, and otherwise misrepresented the likelihood and magnitude of profits with limited risk from trading pursuant to the System, including but not limited to the following misrepresentations:
(a) "Using this system, these profits [$15,187 per month for a "beginning" trader and $50,625 per month for a "more advanced" trader] were and are being made, consistently with currency day trading, month after month and day after day by people currency day trading the Yen from their homes just like you ...guaranteed."
(b) "[D]aily profits are better than 90% of actual trades and losses are limited to only $62.50 per trade/contract."
(c) "Effective risk management has provided our students with a consistent13:1 ratio of profit to loss, which means that for every 13 profitable trades, students encountered only 1 trade of limited losses ... ."
14. In fact, none of Alsafari's clients has reported making profits trading Japanese yen futures pursuant to the System, and Alsafari had and has no reasonable basis for any guarantees or claims of profit or of limited risks in trading foreign currency futures contracts pursuant to his System.
C. Fraudulent Guarantees of Refunds to Purchasers and Misrepresentations that No Purchaser Has Ever Requested a Refund
15. Since January 1998, during demonstrations of the System at his home, at various hotels, and during telephone conversations with purchasers and prospective purchasers of the System, Alsafari has guaranteed a refund of the purchase price of $3,500 if the purchaser of the System fails to trade profitably. Since July 1998, Alsafari has represented on his website the statement that "if you don't make money using this system...you get your money back. Guaranteed." [Ellipsis in text.]
16. Since January 1998, at least 10 persons have each paid $3,500 to purchase the System. Each purchaser has received a document signed by Alsafari guaranteeing a full refund subject to certain conditions.
17. Alsafari has referred purchasers of the System to various introducing brokers through which purchasers have opened trading accounts and traded Japanese yen futures contracts using the System.
18. Purchasers of the System have been unable to profitably trade Japanese yen futures contracts using the System, as guaranteed by Alsafari. In addition, at least one purchaser of the System has never received any materials in consideration for his $3,500 purchase.
19. As a result of their trading losses or failure to receive materials, at least 10 purchasers of the System have requested a refund of their $3500 purchase price in accordance with the guarantee made by Alsafari.
20. Although Alsafari has promised a refund of the $3,500 purchase price to every purchaser, Alsafari has failed, with one exception, to refund the purchase price to any of the purchasers who requested a refund.
21. Despite the requests for refunds made by purchasers of the System, Alsafari has represented on his website since July 1998 that he has never received a request for a refund from any purchaser of the System.
VIOLATIONS OF THE COMMODITY EXCHANGE ACT AND THE REGULATIONS PROMULGATED THEREUNDER
VIOLATIONS OF SECTION 4b(a)(i) and
(iii) OF THE ACT:
FRAUD IN CONNECTION WITH FUTURES CONTRACTS
22. Paragraphs 1 through 21 are realleged and incorporated herein by reference.
23. Since at least January 1998, Alsafari has cheated, defrauded or attempted to cheat or defraud, and has willfully deceived, or attempted to deceive, his clients and prospective customers by (a) falsely representing that he was profitably trading foreign currency contracts in his own account using his System, when, in fact, he was not engaged in trading in any account; (b) falsely representing that he had profitably traded in his personal trading account, when, in fact, he has suffered losses trading foreign currency futures contracts or any other futures contracts in his own account; (c) guaranteeing profits and falsely making claims about the likelihood and magnitude of profits with the use of the System; (d) falsely guaranteeing refunds to purchasers of the System when, in fact, he refused to give such refunds; and (e) falsely misrepresenting that no purchasers of the System had ever requested a refund when, in fact, such requests had been made, all in violation of Section 4b(a)(i) and (iii) of the Act.
24. Each material misrepresentation or omission, and each willful deception made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. §6b(a)(i) and (iii).
VIOLATION OF SECTION 4o (1)
OF THE ACT AND REGULATION 4.41(a):
FRAUD BY A COMMODITY TRADING ADVISOR
25. Paragraphs 1 through 24 are realleged and incorporated herein by reference.
26. Since at least January 1998, Alsafari, while operating as a commodity trading advisor, and by use of the means and instrumentalities of interstate commerce, has directly or indirectly employed or is employing a device, scheme or artifice to defraud clients or prospective clients or has engaged or is engaging in transactions, practices or a course of business which operate as a fraud or deceit upon such clients or prospective clients, in violation of Section 4o(1) of the Act.
27. Since at least January 1998, Alsafari, while operating as a commodity trading advisor, has advertised and is advertising in a manner which employs devices, schemes or artifice to defraud clients or prospective clients, or has engaged or is engaging in transactions, practices or a course of business which operate as a fraud or deceit upon such clients or prospective clients, in violation of Regulation 4.41(a).
28. Each material misrepresentation or omission, and each willful deception made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4o(1) of the Act, 7 U.S.C. §6o(1), and Regulation 4.41(a), 17 C.F.R. § 4.41(a).
Wherefore, the Commission respectfully requests that this Court enter:
A. An Order of permanent injunction, enjoining Alsafari, and all persons insofar as they are acting in the capacity of agents, servants, employees, successors, assigns, or attorneys of Alsafari, and all persons insofar as they are acting in active concert or participation with Alsafari, who receive actual notice of such orders by personal service or otherwise, including by facsimile transmission, from directly or indirectly:
(1) Cheating, defrauding or willfully deceiving or attempting to cheat, defraud or deceive other persons, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (A) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (B) determining the price basis of any transaction in interstate commerce in such commodity, or (C) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, in violation of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. § 6b(a)(i) and (iii); and
(2) While operating as a commodity trading advisor, employing any device, scheme, or artifice to defraud, or engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon, any client or prospective client, including the purchaser or prospective purchaser of the System, by use of the mails or any means or instrumentality of interstate commerce, in violation of Section 4o(1) of the Act, 7 U.S.C. § 6o(1), and Commission regulation 4.41(a), 17 C.F.R. 4.41(a);
B. An order directing that an accounting be made to both the Court and the Commission of all assets and liabilities of Alsafari, together with all funds received from and paid out by him to purchasers of the System and other persons in connection with commodity futures transactions or purported commodity futures transactions, and all disbursements for any purpose whatsoever of funds received from purchasers of the System, including salaries, commissions, fees, loans, and other disbursements or money and property of any kind;
C. An order directing Alsafari to disgorge all benefits received including, but not limited to, salaries, commissions, fees, revenues, and trading profits derived, directly or indirectly, from acts or practices which constitute violations of the Act or Regulations, as described herein, plus prejudgment interest on such amounts;
D. An order of restitution directing Alsafari to make whole each and every purchaser of his trading system whose funds he received or utilized in violation of the provisions of the Act or Regulations, plus prejudgment interest on such amounts;
E. An order imposing a civil monetary penalty on Alsafari in an amount not more than the higher of: (1) $110,000 or (2) triple the monetary gain to the Alsafari for each violation of the Act or Regulations;
F. An award of prejudgment interest;
G. An order requiring Alsafari to pay costs and fees as permitted by 28 U.S.C. §§ 1920 and 2412(a)(2); and
H. Such other equitable relief as the Court may deem necessary or appropriate under the circumstances.
|DATED: September 6, 2000||BERNARD J. BARRETT, State Bar No. 165869|
|LOUIS V. TRAEGER, State Bar No. 38714|
|MYRNA D. MORGANSTERN, State Bar No. 72011|
|COMMODITY FUTURES TRADING COMMISSION|
|10900 Wilshire Boulevard, Suite 400|
|Los Angeles, California 90024|
|Telephone (310) 235-6783|
|Facsimile (310) 235-6782|
|Myrna D. Morganstern|
|Attorneys for Plaintiff|
|Commodity Futures Trading Commission|