Release: #4147-98 (97-Civ 6800)
For Release: May 12, 1998
CALIFORNIA COURT ENTERS $1.1 MILLION JUDGMENT AGAINST TWO REDONDO BEACH, CALIFORNIA, PONZI SCHEME OPERATORS IN CFTC ENFORCEMENT ACTION
Defendants Gabor Urban and Marta Ban Consent to the
Entry of Permanent Injunctions as a Part of the Settlement
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced that on May 4, 1998, the Honorable Manuel Real of the U.S. District Court for the Central District of California entered consent orders of permanent injunction and other relief against Gabor Urban and Marta Ban, who operated a futures trading Ponzi scheme out of their home in Redondo Beach, CA from January 1996 through September 1997.
The orders were part of a settlement of a five-count civil complaint filed by the CFTC against Urban, Ban, and their commodity pool L.A. Forex, Inc., also of Redondo Beach, on September 12, 1997 (see CFTC News Release #4052-97, September 16, 1997). The CFTC complaint alleged that since early 1996 the defendants misappropriated more than $900,000 in a fraudulent Ponzi scheme in connection with their operation of an unregistered commodity futures pool.
The orders require Urban to make restitution of approximately $1.1 million obtained from the public through fraud and deceit in violation of Sections 4b and 4o of the Commodity Exchange Act (CEA) and require Urban and Ban to account for missing customer funds.
The orders also permanently enjoin Urban and Ban from further violations of the CEA, soliciting money from the public for the purpose of trading futures contracts and acting as a commodity pool operator or in any other capacity required to be registered with the CFTC under the CEA.
The Ponzi Scheme
In the consent orders, Judge Real entered findings that Urban and Ban created L.A. Forex, Inc. in late 1995 for the purpose of operating a commodity pool. Over the course of the next 20 months, Urban and Ban induced over 35 members of the public, many of them in the southern California Hungarian community, to open accounts with L.A. Forex and deposit over $1.3 million.
According to the entered findings, customers were told that Urban and Ban had a successful track record in trading futures, and that L.A. Forex's trading was profitable. In actuality, the court finds, Urban and Ban were novice traders who were learning futures trading on customer funds and who lost over $730,000 trading in futures. According to the court, in order to continue the inflow of customer funds and to prevent customers from withdrawing their funds, Urban and Ban distributed false account statements that showed profitable returns to their investors when, in fact, these accounts were suffering substantial losses.
In furtherance of their Ponzi scheme, Urban and Ban also used new customer funds to pay other customers, in order to create the appearance of liquidity and profitability, and to pay for Urban's and Ban's personal expenses, including clothing and house maintenance bills, the court found.
Court Granted the CFTC Preliminary Injunctions in the Action in 1997; Default Judgment Order Entered Against L.A. Forex in March
Acting on a customer complaint, the CFTC, in a cooperative civil and criminal investigation with the Redondo Beach, California, Police Department and the California Department of Corporations, investigated Urban's and Ban's commodity pool activities.
The District Court entered a preliminary injunction against the defendants on September 15, 1997, enjoining them from soliciting money from members of the public, from trading in futures contracts, and from violating any provision of federal commodity law. In March 1998, the court entered a judgment by default against L.A. Forex. The default judgment requires L.A. Forex to pay restitution of $1.1 million to defrauded investors, imposes $550,000 in civil monetary penalties against the firm, permanently enjoins L.A. forex from soliciting money from the public for the purpose of trading futures contracts and from trading futures contracts, and requires L.A. Forex to make a full accounting all customer funds received.