Release Number 5795-10
For Release: March 15, 2010
CFTC Charges Raleigh, North Carolina Man And His Company, Yellowstone Partners, Inc., with Operating a Foreign Currency Ponzi Scheme
Court issues emergency order freezing defendants’ assets and protecting books and records.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it charged Dennis Todd Hagemann and Yellowstone Partners, Inc., both of Raleigh, N.C., with operating a Ponzi scheme involving the fraudulent solicitation of at least $700,000 from at least nine individuals to trade foreign currency futures (forex) managed accounts and/or a pooled investment. Defendants also allegedly attempted to solicit funds from at least one other individual.
On March 10, 2010, Chief Judge Louise Flanagan of the U.S. District Court for the Eastern District of North Carolina entered an emergency order freezing the defendants’ assets and prohibiting the destruction of books and records. The order also requires the defendants to account for assets.
The CFTC’s enforcement action, filed under seal on March 9, 2010, charges that, from at least September 2009 to the present, the defendants fraudulently solicited and received at least $700,000 from retail forex customers. In at least two instances, Hagemann solicited $50,000 through meetings held at restaurants, according to the complaint.
The complaint charges that Hagemann falsely claimed experience and success in trading forex and lured customers with false promises of quick and large profits, including that Yellowstone Partners was returning 100 to 300 percent to customers “every couple of months.” He also created the impression of being a well established forex trader by falsely representing that 1) he had $500 million of investments under his control at all times, 2) his forex trading system made money even when markets dropped and 3) his Russian contacts could help his investments, according to the complaint. Hagemann also claimed to be registered with the National Futures Association (NFA) and to have employees registered with the NFA when, in fact, he is not registered with the NFA and does not have any employees registered with the NFA in any capacity.
According to the complaint, only $200,000 of the approximately $700,000 solicited from customers was deposited into forex trading accounts, and the defendants lost nearly all of that money trading forex. By November, 2009, as alleged, Hagemann stopped trading the Yellowstone accounts and misappropriated the remaining $500,000 in customer funds for personal use or to make purported profit payments or return customers’ principal in a manner similar to a Ponzi scheme.
Hagemann arrested by North Carolina criminal authorities
The CFTC appreciates the assistance of the North Carolina Department of the Secretary of State, Securities Division. Hagemann was arrested on March 10, 2010, by North Carolina authorities based on charges by the North Carolina Securities Division.
The following CFTC Division of Enforcement staff members are responsible for this case: Jason Mahoney, Mary Kaminski, John W. Dunfee, Paul G. Hayeck and Joan Manley.
Last Updated: April 2, 2010