Release: 4513-01 (Civ-01-8350)
For Release: May 2, 2001
CFTC FILES ENFORCEMENT ACTIONS AGAINST FIRMS FRAUDULENTLY SELLING ILLEGAL FOREIGN CURRENCY (FOREX) OPTIONS
In Two Separate Actions, CFTC Charges (1) the ICS Common Enterprise (three Florida companies) and Three Individuals - Valentin Fernandez, Daniel Phillips, and Manny Kavekos of Florida; and (2) Infinite Trading Group, L.L.C., a Georgia Forex Firm, along with Shawn Christie, Edward Cameron Lindsey and Anthony Garcia of Georgia
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced today that it had filed two civil injunctive actions in the last week against firms engaged in fraudulent sales and solicitations of foreign currency options, and that restraining orders have been entered in both cases which, among other things, freeze the defendants' assets. On April 30, 2001, the CFTC filed a civil injunctive action in the United States District Court for the Northern District Of Georgia, Atlanta Division, against Infinite Trading Group, L.L.C., a limited liability company organized under the laws of the State of Georgia, along with Shawn Christie of Atlanta, Georgia, Edward Cameron Lindsey of Lithonia, Georgia and Anthony Garcia of Atlanta, Georgia.
On April 23, 2001, the CFTC filed a civil injunctive action in the United Stated District Court for the Southern District of Florida against three firms, International Currency Strategies, Inc., Fairfield Currency Group, Inc. and Strategic Trading Group, Inc. (collectively, the ICS Common Enterprise), each a Florida corporation, and Valentin Fernandez of West Palm Beach, Florida, Daniel Phillips of Stuart, Florida, and Manny Kavekos of West Palm Beach, Florida.
These two actions follow a third action that was filed on April 19 against SunState FX, Inc. and Ulrich Garbe in the United States District Court for the Southern District of Florida, also alleging fraudulent sales of forex options contracts. These actions, as well as the issuance of a Consumer Advisory, are part of the Commission's continuing efforts to address the problem of forex fraud and educate the public about its dangers, in the wake of Congress's recent clarification of the CFTC's jurisdiction in this area. These developments are discussed in more detail below.
James E. Newsome, Acting Chairman of the CFTC, commented:
To protect the integrity of our markets and the legitimate participants, it is imperative that we crack down on individuals and companies that fraudulently telemarket foreign currency options. With our clarified authority under the Commodity Futures Modernization Act, the CFTC has launched a comprehensive initiative to get rid of illegal retail foreign currency scams. We plan to continue to coordinate our civil prosecutions with state and federal criminal authorities in order to protect the investing public from FOREX fraud.
The Georgia District Court Action against Infinite, Christie and Lindsey Also Alleges Defendants Made False Claims about Profitability and Risks of Trading Forex Options and Misappropriated Customer Funds
The complaint filed against Infinite, Christie, Lindsey, and Garcia in Georgia District Court charges the defendants with fraudulently soliciting customers to purchase illegal foreign currency forex options contracts, accepting customer funds for the purchase and sale of those options and subsequently using those funds for personal expenses without purchasing any forex options. Specifically, the complaint alleges that, since at least December 21, 2000, Defendants defrauded Infinite customers by making exaggerated claims of profits, minimizing risk of loss, and by misappropriating customer funds, which had been solicited for the purchase of foreign currency options, but instead were used for personal expenses, such as payments to adult entertainment locations and restaurants, and for maid services and video rentals.
On April 30, the Honorable Thomas W. Thrash, Jr., entered a statutory restraining order freezing defendants' assets, prohibiting the destruction of documents and appointing a receiver to implement the court's order.
In its complaint, the CFTC is seeking preliminary and permanent injunctive relief, restitution for defrauded customers, and disgorgement of ill-gotten gains. A hearing on the CFTC's motion seeking a preliminary injunction is scheduled for May 14, 2001, at 9:00 am.
The investigation that led to the issuance of a complaint against the defendants was coordinated with the Georgia Governor's Office of Consumer Affairs. On May 1, 2001, Christie and Lindsey were arrested by officers from the Governor's Office of Consumer Affairs for, among other things, violations of the Georgia Telemarketing Fraud statute. Christie and Lindsey will be prosecuted in Georgia State Court for criminal violations in connection with their activities at Infinite. [For more information regarding the activities of the Georgia Governors' Office of Consumer Affairs in this matter, contact Bill Cloud, Spokesman, (404) 656-3793.]
The CFTC was assisted in its action by the Georgia Governor's Office of Consumer Affairs and the United States Attorneys Office for the Northern District of Georgia in this matter, which is serving as local counsel.
CFTC Alleges that the ICS Common Enterprise, Valentin, Phillips, and Kavekos Misrepresented Profits and Risks Associated with FOREX Options and Misappropriated Investor Funds Through a Nationwide Telemarketing Scheme
The complaint against the ICS Common Enterprise in the Florida District Court action charges the defendants with fraudulently soliciting customers to purchase illegal forex options contracts through false claims about the profitability and risk of forex options trading. The complaint also names Financial Clearing Corp. as a relief defendant. Financial Clearing Corp. is a British Virgin Islands corporation that receives correspondence in the Bahamas and which allegedly holds funds that are traceable to the funds and assets fraudulently obtained from ICS Common Enterprise customers. The CFTC's complaint estimates that total customer losses exceed $3 million. The complaint also alleges that defendants are misappropriating funds and using those funds for personal expenses, such as purchases at Saks Fifth Avenue and jewelry and furniture stores.
On April 23, the Honorable William P. Dimitrouleas entered a restraining order freezing assets of the defendants and relief defendant, prohibiting the destruction of documents and appointing a receiver to take control of the ICS Common Enterprise and implement the court's order.
In its continuing litigation, the CFTC is seeking preliminary and permanent injunctive relief, restitution for defrauded customers, and disgorgement of ill-gotten gains. A hearing on the CFTC's motion seeking a preliminary injunction is scheduled for May 4, 2001, at 11 am.
In a related criminal action, the Office of the United States Attorney for the Southern District of Florida issued indictments against and arrested Fernandez, Phillips, and Kavekos as well as Juan Fernandez for criminal violations arising out of the same activities. The CFTC coordinated its action with the U.S. Attorney's Office and the Federal Bureau of Investigation.
Armed with New Federal Legislation, the CFTC Brings This Action as Part of Its Continuing Efforts to Shut Down Firms Fraudulently Offering Illegal Forex Futures and Options Contracts
Also in the last weeks, the CFTC filed an enforcement action in the United States District Court for the Southern District of Florida, charging that SunState FX, Inc. and Ulrich Garbe were illegally offering forex options contracts to the retail public (see CFTC News Release 4508-01, April 19, 2001). On April 30, 2001, the Honorable Federico Moreno issued a preliminary injunction against SunState and Garbe, restraining them from further violations of the Commodity Exchange Act and Commission regulations. That action and the two announced today are the first since the recent enactment of federal legislation entitled the Commodity Futures Modernization Act of 2000 (CFMA). The CFMA clarified the CFTC's jurisdiction over retail forex futures and options transactions offered by unregulated firms.
CFTC Issued A Consumer Advisory Warning the Public of the Risks of Foreign Currency Trading and Foreign Currency Scams
Earlier this year, the CFTC issued a Consumer Advisory urging the public to scrutinize claims of high-return, low-risk investment opportunities in foreign currency trading. The Advisory provides "red flags" to look for, and cautionary steps they should take before making an investment. The CFTC also issued an Advisory concerning the CFMA and how forex firms may lawfully offer foreign currency futures and options trading opportunities to the retail public (see CFTC Advisory 06-01, February 5, 2001).
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