Release: 4508-01 (01-8329-Civ-Moreno)
For Release: April 19, 2001
CFTC CHARGES SUNSTATE FX, INC. AND ULRICH GARBE OF BOCA RATON, FLORIDA, WITH FRAUD IN CONNECTION WITH THE SOLICITATION OF INVESTORS TO TRADE FOREIGN CURRENCY (FOREX) CONTRACTS
Complaint Alleges that SunState and Garbe Fraudulently Operated a Commodity Pool and Illegally Offered Foreign Currency Options to the Retail Public; Court Enters Ex Parte Restraining Order Against the Defendants on the Same Day the Complaint is Filed
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on April 18, 2001, the Commission filed a four-count complaint against SunState FX, Inc., a Florida corporation, and Ulrich Garbe, both of Boca Raton, Florida, charging them with violations of the Commodity Exchange Act (CEA) in connection with their solicitation of investors to trade foreign currency contracts, which resulted in the fraudulent operation of a commodity pool, the illegal offer and sale of commodity options and registration violations. On the same day that the complaint was filed, the Honorable Federico A. Moreno of the U.S. District Court for the Southern District of Florida entered an ex parte restraining order against the defendants preventing the destruction of documents.
The CFTC complaint charges that, from at least March 2000 to the present, SunState and Garbe, SunState's chief investment officer, have solicited, accepted, and pooled funds from investors, purportedly to trade forward and spot foreign currency. The complaint further alleges that, in April 2000, SunState and Garbe defrauded SunState investors by misappropriating and transferring $1 million of their commingled funds -- which had been solicited to trade foreign currencies -- into a commodity trading account and thereafter by trading commodity futures without their knowledge and consent. By such acts, the complaint alleges, SunState fraudulently operated a commodity pool in that SunState was not registered with the Commission as a commodity pool operator.
In addition, the CFTC complaint alleges that, since December 21, 2000, SunState and Garbe have also solicited investors to enter into transactions in retail foreign currency options in violation of the CEA and Commission regulations. Specifically, the complaint alleges that SunState and Garbe purportedly sold to at least one investor options on Euros, which were not traded on a contract market designated by the CFTC. As alleged, SunState is not a designated contract market and thus defendants were offering illegal foreign currency options.
CFTC Obtains Restraining Order and Seeks Preliminary and Permanent Injunctive Relief
Simultaneously with the filing of the complaint, the CFTC sought and obtained an ex parte restraining order prohibiting the defendants from destroying documents. In its continuing litigation against the defendants, the CFTC is seeking preliminary and permanent injunctive relief, restitution to customers, disgorgement of ill-gotten gains, and civil monetary penalties in the amount of not more than the higher of $110,000, or $120,000 for violations on or after October 23, 2000, or triple the monetary gain to the defendants for each violation of the CEA and CFTC regulations.
CFTC Action Is Part of Coordinated Cooperative Enforcement Activities
As part of a coordinated cooperative enforcement effort with the U.S. Securities and Exchange Commission (SEC), the SEC also filed a civil injunctive action against SunState, Garbe, and two other SunState officers for violations of the federal securities laws arising out the same underlying facts.
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