U.S. DISTRICT COURT FREEZES ASSETS OF SOUTH FLORIDA FOREIGN CURRENCY FIRM MADISON FOREX INTERNATIONAL BASED ON FRAUD ALLEGATIONS BY U.S. COMMODITY FUTURES TRADING COMMISSION
Owner, John Peter D’Onofrio, and Employees Christopher Peck, Gary Baugh, and Lea Lauren Allegedly Lied to Customers When Pitching Foreign Currency Options
Predecessor Company Chadwick Grayson Bauer & Co., and Employees Also Charged With Foreign Currency Fraud
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of an enforcement action in the United States District Court for the Southern District of Florida against Madison Forex International, LLC, a Florida limited liability company, Chadwick Grayson Bauer & Co., Inc. (Chadwick), a Florida corporation, Qualified Leverage Providers, Inc. (QLP), a Florida corporation that is a registered futures commission merchant, and Florida residents John Peter D’Onofrio of Ft. Lauderdale, Christopher Peck of Boca Raton, Gary Baugh of Pompano Beach, and Lea Lauren charging defendants with defrauding customers. The complaint, which was filed on October 18, 2005, alleges that defendants solicited more than $4 million from customers to trade foreign currency (forex) options and futures.
On the same day the complaint was filed, the Honorable Cecilia M. Altonaga, U.S., District Judge, issued a restraining order freezing the assets of all the defendants except QLP, and prohibiting the defendants from destroying documents.
The CFTC complaint alleges that, from November 2003 through March 2005, Madison, Peck, Lauren, and other Madison employees solicited the general public to trade forex options by using aggressive, high pressure sales tactics that exaggerated the likelihood of profits and minimized the risks involved in the trading.
Specifically, according to the complaint, defendants told customers that eight out of ten of the firm’s recommended trades were profitable, customers could double or triple their money in a matter of months, and none of Madison’s customers had ever lost money. The complaint further alleges that those statements were untrue, and instead at least 177 Madison customers had losses totaling approximately $2.7 million.
According to the complaint, the defendants’ abysmal trading record was never revealed to customers or potential customers while, on the other hand, profits were touted. Also according to the complaint, D’Onofrio, as the owner, and Baugh, as the managing partner, are liable for Madison’s violations as controlling persons of Madison, and QLP is liable for violations of its agent, Madison.
Peck and other employees of Chadwick, a predecessor company to Madison, engaged in similar fraud in soliciting customers to trade foreign currency futures and options between September 2002 and November 2003, according to the complaint. Chadwick allegedly churned customer accounts by trading those accounts for the purpose of generating commissions, without regard for customers’ interests. In a seven-month period in 2003, it is alleged that these managed accounts lost $320,000 of $440,000 invested, including $230,000 in commissions paid to Chadwick. The complaint alleges that D’Onofrio and Baugh, as President and Vice President of Chadwick, respectively, are liable for Chadwick’s fraud violations as controlling persons.
In the continuing litigation, the CFTC is seeking preliminary and permanent injunctive orders enjoining future violations, ordering repayment of funds to defrauded customers, and imposing civil penalties.
The following CFTC Division of Enforcement staff members are responsible for this case: Robert J. Greenwald, William Heitner, Scott Williamson, and Rosemary Hollinger.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious Internet websites.
You may contact the CFTC at 1-866-FON-CFTC (1-866-366-2382), visit us at our Customer Protection web page: (www.cftc.gov/cftc/cftccustomer.htm), or fill out our Internet Report Form identifying your concerns (www.cftc.gov/enf/enfform.htm).
In addition, the CFTC publishes a series of Consumer Advisories at http://www.cftc.gov/cftc/cftccustomer.htm#advisory alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.
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