For Release: August 28, 2001
CFTC’s LATEST ACTION PART OF
CRACKDOWN ON FOREIGN CURRENCY (FOREX) SCAMS
Complaint Charges Defendants with Defrauding U.S. and Canadian Citizens; Telemarketers Used High-Pressure Sales Tactics to Solicit Customers
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a federal lawsuit in the United States District Court for the Southern District of Florida against World Banks Foreign Currency Traders, Inc. (World Banks) and International Investors Trading Group, Inc. (IITG), two Florida corporations, and Daniel T. Ledoux of Jupiter, Florida, Gavin Livoti and Bryant Crowder of Boca Raton, Florida. The CFTC charges the defendants with the fraudulent telemarketing of illegal foreign currency (forex) options and alleges that they lured customers with false claims that forex investments offered extraordinary profits with little risk.
The federal court issued an emergency order freezing defendants’ assets and ordering them to turn over books and records. In papers filed to support its request for emergency relief, the CFTC alleges that over $1.1 million was transferred from World Banks’ accounts to a Bahamian firm. The role of the Bahamian firm in the scam was not disclosed to customers.
According to the complaint, World Banks, IITG, and the individual defendants solicited customers to invest in purported forex investments, by claiming that because of falling interest rates, a weakening U.S. dollar, or other market news, the value of the Euro or Japanese Yen was poised to skyrocket, which would allow quick-acting customers to make huge profits in a matter of weeks or months through the purchase of foreign currency options. At the same time, the complaint alleges, defendants drastically downplayed the potential risk of loss by promising to use their years of expertise to watch the market closely and alert customers to get out of the market at the right time.
The complaint further alleges that when a customer hesitated, telemarketers pursued the sale through a barrage of calls – three times in an hour, according to one sworn statement filed by the CFTC. Once a customer decided to invest, the complaint alleges, telemarketers continued their high-pressure tactics by sending account opening documents by fax and FedEx. The CFTC further alleges that defendants became evasive or unavailable to customers once customers started inquiring about their investments.
For example, as alleged, customers received conflicting messages about the status of the firm’s operations and at times encountered disconnected phone lines or received a recorded message stating that calls from the customer’s calling area were “blocked.” The CFTC charges that ultimately, defendants told customers that most, if not all, of their money is gone.
In its continuing litigation, the CFTC is seeking preliminary and permanent injunctive relief, restitution for defrauded customers, civil monetary penalties of $120,000, or triple the monetary gain to defendants (whichever is higher) for each violation, and disgorgement of ill-gotten gains. A hearing on the CFTC’s motion for a preliminary injunction has been set for September 7, 2001.
Note to Editors
This enforcement action is part of a series of actions filed by the CFTC this past spring and summer, alleging the sale of illegal foreign currency futures and options. (Please refer to CFTC News Releases 4513-01, May 2, 2001; 4528-01 June 20, 2001, and 4551-01, August 14, 2001.)
In addition, earlier this year, the CFTC issued a forex Consumer Advisory urging the public to scrutinize claims of high-return, low-risk investment opportunities in foreign currency trading. The Consumer Advisory provides “red flags” to look for, and cautionary steps customers should take before making an investment. The CFTC also issued an Advisory, concerning the Commodity Futures Modernization Act (CFMA) and how forex firms may lawfully offer foreign currency futures and options trading to the retail public (please see CFTC Advisory 06-01, February 5, 2001).
Copies of the complaint filed and order entered in this case are available at the CFTC’s Website at http://www.cftc.gov./
Media Case Contact:
Lawrence H. Norton
Associate Director, CFTC Division of Enforcement
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