For Release: November 19, 2003
U.S. COMMODITY FUTURES TRADING COMMISSION (CFTC) JOINS OTHER MEMBERS OF THE PRESIDENT’S CORPORATE FRAUD TASK FORCE IN UNDERCOVER "OPERATION WOODEN NICKEL” TO PROSECUTE INDIVIDUALS AND COMPANIES ALLEGEDLY STEALING MILLIONS OF DOLLARS THROUGH SALES OF ILLEGAL FOREIGN CURRENCY (FOREX) FUTURES CONTRACTS
CFTC Charges 31 Individuals and Entities With Fraud, Selling Illegal Futures Contracts, and Filing False Reports
WASHINGTON -- The U.S. Commodity Futures Trading Commission (CFTC) announced today that on Tuesday, November 18, 2003, it filed six separate federal injunctive actions charging a total of 31 individuals and entities with engaging in fraud in the sale and solicitation of illegal foreign currency (forex) futures contracts. A U.S. District Court in New York entered restraining orders in all six cases, which, among other things, freeze the defendants' assets.
The CFTC actions resulted from the CFTC's participation in Operation Wooden Nickel, an undercover law enforcement sting run by federal law enforcement personnel from the Federal Bureau of Investigation (FBI) and the U.S. Attorney's Office for the Southern District of New York. As part of the undercover operation, federal criminal agents infiltrated a forex boiler room in the World Financial Center allegedly operated by corrupt sellers of illegal forex futures contracts. The agents captured hundreds of hours of video and audio recordings of defendants allegedly scheming to deceive unsuspecting customers and steal millions of dollars. Operation Wooden Nickel is one of the largest undercover operations in which the CFTC has participated.
Gregory G. Mocek, CFTC Enforcement Director, commented:
Today's actions demonstrate the CFTC's continuing commitment to eradicating the scourge of foreign currency fraud. In conjunction with actions taken by other federal agencies, the CFTC'ssix cases seek to halt a scam that allegedly has defrauded small investors and large institutions alike. The Commissionhas devoted substantial resources toprotecting the public andthe markets against rogue futures operations.
We congratulate the FBI, the US Attorney's Office for the Southern District of New York, and the SEC for their work in Operation Wooden Nickel. As today’s actions show, civil and criminal agencies achieve powerful results when they work together to stamp out forex swindles. We will continue to coordinate our civil prosecutions with state and federal criminal authorities to protect the investing public from violations of the Commodity Exchange Act. I am extremely proud of the work of the CFTC personnel involved in making Operation Wooden Nickel a success.
Federal Court Freezes Defendants’ Assets
On November 18, 2003, the CFTC filed six civil injunctive actions in the United States District Court for the Southern District of New York. Four of the six actions allege that the defendants in those cases fraudulently solicited customers to purchase illegal forex contracts, accepted customer funds for the purchase and sale of those futures contracts, and subsequently used those funds for personal expenses. The fifth complaint alleges that defendants in that action converted funds stolen from certain banks through the use of illegal forex futures transactions. The sixth complaint alleges that certain defendants made false filings with the National Futures Association (NFA), the futures industry’s self-regulatory organization.
Madison Deane, et al., Docket No. 03-CV-9128
Specifically, the first complaint alleges that since at least the spring of 2002, defendants Madison Deane & Associates, Inc., Madison Deane Asia Corporation, New York Capital Assets, Inc., ISB Clearing Corporation, Free Star Capital, Inc., William, Holbrook & Associates LLC, Oxford Capital Group LLC, Vito Napoletano of Staten Island, NY, Leonard Basman of Staten Island, NY, Matthew Salinas of Queens, NY, Ian Bursztyn of Commack, NY, George Omeste of Staten Island, NY, Damon Ripley of Brooklyn, NY, and Abdeldayem Mazen of Brooklyn, NY, have fraudulently solicited funds from the public for the purpose of trading managed forex futures accounts. In addition, the complaint alleges that these defendants misappropriated and/or misused those customer funds and issued false statements to customers that did not disclose the defendants’ unauthorized withdrawal of funds from the customers’ accounts.
First Lexington Group, et al., Docket No. 03-CV-9124
The second complaint alleges that from at least October 2001 through March 2003, defendants First Lexington Group, LLC and Joseph Grunfeld of Cedarhurst, NY, fraudulently solicited and obtained more than $2 million dollars from as many as 60 customers for the purpose of trading managed accounts in forex futures contracts. In addition, the complaint alleges that these defendants misappropriated a significant portion of the funds solicited from customers, and issued false statements to customers that did not disclose the unauthorized withdrawal of funds from their accounts but instead recounted fictitious futures trading of forex futures contracts.
Walter Scott Lev, et al., Docket No. 03-CV-9126
The third complaint alleges that from at least January 1999 to at least April 2002, defendants Walter Scott Lev & Associates, LLC, Michael Ross of NY, NY, Maxim Yampolsky of NY, NY, Edward Sapienza, Jr. of NY, NY, Frank Schiavone of Howard Beach, NY, Michael Korobov of NY, NY, and Boris Shuster, a/k/a/ Robert Shuster of Brooklyn, NY, fraudulently solicited and obtained approximately $21.9 million from more than 850 customers for the purpose of trading forex futures. According to the complaint, instead of trading their customers' funds, these defendants misappropriated a substantial portion of the $21.9 million obtained from unsuspecting customers. As alleged, in furtherance of their fraudulent scheme, these defendants misled customers with false monthly account statements showing considerable profits, and then abruptly notified customers that purported catastrophic trading losses had wiped out their funds.
Itradecurrency USA, et al., Docket No. 03-CV-9129
The fourth complaint alleges that from at least December 21, 2000 to the present, defendants Itradecurrency USA, LLC, Stephen E. Moore of New York, NY, and Anthony Iannuzzi of Goshen, NY, fraudulently solicited and obtained approximately $1.6 million from customers for the purpose of trading forex contracts. Instead of actually trading their customers' funds, defendants allegedly misappropriated and misused a substantial portion of these funds.
“Knowledgeable Trades”, Docket No. 03-CV-9125
The fifth complaint alleges that from May 2003 to the present, traders at certain banks and their co-conspirators in the retail forex business engaged in a scheme they called “knowledgeable trades” to defraud and deceive the banks. The complaint alleges that by engaging in illegal foreign currency futures transactions, these co-conspirators converted funds belonging to the banks and concealed the conversion from the banks. The complaint names as defendants: Ian Bursztyn of Commack, New York, Vito Napoletano of Staten Island, NY, Anthony DiNapoli of Brooklyn, NY, John Capuano of Brooklyn, NY, Patrick Sweeney of Freehold, NJ, Joseph Torre of Old Bridge, NJ, John Messina of Brooklyn, NY, Itradecurrency USA, LLC, Stephen Moore of NY, NY, and Anthony Iannuzzi of Goshen, NY.
ISB Clearing Corporation, et al, Docket No. 03-CV-9127
The sixth complaint alleges that from at least April 2003 to the present, defendants ISB Clearing Corporation, a Futures Commission Merchant registered with the CFTC, Ian Bursztyn of Commack, NY, and Vito Napoletano of Staten Island, NY repeatedly have filed financial reports with the NFA that contain materially false statements that purport to identify accounts at banks or broker/dealers that hold customer funds and the amounts of customer funds purportedly held in those accounts.
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In its complaints, the CFTC is seeking preliminary and permanent injunctive relief, restitution for defrauded customers, civil monetary penalties, and disgorgement of ill-gotten gains.
The CFTC was assisted in its action by the National Futures Association. The CFTC coordinated its actions with the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Securities and Exchange Commission.
Staff from the CFTC’s Eastern Regional Office, Division of Enforcement, were responsible for this action.
CFTC Media Contact:
Stephen J. Obie
Associate Director and Regional Counsel
Eastern Regional Office
CFTC Division of Enforcement
Other Media Contacts:
Securities and Exchange Commission (SEC)
Mark K. Schonfeld, Associate Regional Director
U.S. Attorney's Office (USAO)
Michael Kulstad, Public Information Office
U.S. Department of Justice, United States Attorney
Southern District of New York
Department of Justice
Website for identified victims who have been provided with a Victim Identification Number (VIN))
Department of Justice
Website for victims who have not yet been identified or provided with a Victim Identification Number (VIN)
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The CFTC Has Issued A Consumer Advisory Warning the Public of the Risks of Foreign Currency Trading and Foreign Currency (FOREX) Scams
The CFTC has issued a Consumer Advisory (at www.cftc.gov/cftc/cftccustomer.htm) urging the public to scrutinize claims of high-return, low-risk investment opportunities in foreign currency trading. This Consumer Advisory provides "red flags" to look for, and cautionary steps to be taken before making an investment. The CFTC has also issued Advisories concerning the Commodity Futures Modernization Act of 2000, and how FOREX firms may lawfully offer foreign currency futures and options trading opportunities to the retail public (see CFTC Press Release 4625-02, March 21, 2002, CFTC Advisory, March 21, 2002, and CFTC Advisory 06-01, February 5, 2001).
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