For Release: May 2, 2002
CFTC CHARGES UTAH INVESTMENT FIRM WITH RUNNING A $14.7 MILLION FOREIGN CURRENCY (FOREX) PONZI SCAM
Federal Court Immediately Freezes Assets of 4NExchange, LLC, Paul Grant and Ronald Bassett In Related Action
WASHINGTON, D.C. -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a civil injunctive action in federal court in Utah against 4NExchange, LLC (4N Exchange) of Alpine, Utah, and its principals, Paul Grant of Alpine, Utah, and Ronald Bassett of Lindon, Utah, charging them with illegally offering investments in foreign currency (forex) futures contracts and with operating a Ponzi scheme that took in almost $15 million from unsuspecting customers. The State of Utah joined in the CFTC complaint, charging that defendants operated an unregistered investment company and committed fraud, in violation of the registration and antifraud provisions of the Utah Code.
The CFTC complaint specifically alleges that, from December 21, 2000 through the present, the defendants have operated an investment firm in Alpine, Utah for the purpose of selling foreign currency futures contracts to the retail public. According to the complaint, from October 1, 2001 through April 16, 2002, 4NExchange, Grant and Bassett fraudulently solicited up to 100 investors to invest $14.7 million to trade with them. However, as the complaint further alleges, 4NExchange appears to have invested at best only $200,000 of the customer funds. The complaint alleges that defendants ran a classic Ponzi scheme by using the rest of $14.7 million to return investments plus purported profits to customers who invested early with 4NExchange, to pay the business expenses of 4NExchange and to pay more than $500,000 to Grant and Bassett.
A hearing on the CFTC’s motion for a restraining order and preliminary injunction is scheduled for May 13, 2002.
The Utah Division of Securities provided invaluable assistance to the CFTC in its investigation of this case. The Securities and Exchange Commission filed a related action against the defendants today in the same court, in which the court issued a restraining order freezing the assets of the defendants and prohibiting the destruction of documents.
“This is a perfect example of how state and federal authorities can work together to prosecute those that commit fraud,” said Gregory Mocek, the CFTC’s Director of Enforcement.
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Over the past year, the CFTC has brought eleven other enforcement actions alleging the sale of illegal foreign currency futures and options. (Please see CFTC News Releases 4611-02, February 27, 2002; 4513-01, May 2, 2001; 4528-01, June 20, 2001, 4551-01, August 14, 2001, 4563-01, August 28, 2002.)
Investors Seeking Information on Forex Scams Should Review CFTC Consumer Advisory Listing Warning Signs
Last year, the CFTC issued a Consumer Advisory (February 8, 2001) as part of the Commission's continued efforts to combat retail Forex fraud. The Advisory urges the public to scrutinize claims of high-return, low-risk investment opportunities in forex trading. The Consumer Advisory provides "red flags" to look for, and cautionary steps consumers should take before making investments. The CFTC also has issued two Advisories on 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; CFTC Press Release 4625-02, March 21, 2002; and CFTC Advisory, March 21, 2002).
The following Division of Enforcement staff is responsible for this case: Jack Barrett, Jay Miller and Bruce Gale.
A copy of the CFTC complaint and the restraining order may be obtained at www.cftc.gov.
Regional Counsel, Western Regional Office
CFTC Division of Enforcement
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