Release Number 8524-22
CFTC Charges California Man and His Companies with Fraud and Misappropriation
Judge Grants Restraining Order
May 10, 2022
Washington, D.C. — The Commodity Futures Trading Commission today announced that it has filed a civil enforcement action in the U.S. District Court for the Eastern District of California against Eshaq M. Nawabi of either Salida or Manteca, California and his companies Nawabi Enterprise and Hyperion Consulting Inc. The complaint charges the defendants with fraud and misappropriation related to an off-exchange foreign currency (forex) trading scheme in which they solicited funds totaling at least $543,000 from at least seven investors.
According to the complaint, from approximately October 2019 through the present, the defendants solicited and pooled hundreds of thousands of dollars from at least seven pool participants for the purported purpose of trading forex. To persuade the pool participants to send them money, the defendants made fraudulent and material misrepresentations and omissions including they had historically made large profits, between 8 to 25% per month, for themselves and pool participants from trading forex; (2) pool participants would realize profits of 8 to 25% per month on their funds with minimal risk; (3) the defendants would trade forex with the funds the pool participants deposited; and (4) upon request, pool participants could withdraw their funds at any time.
Instead of trading pool participant funds as promised, the defendants misappropriated their money for Nawabi’s own personal benefit as well as to pay other pool participants in a Ponzi-like scheme. To conceal their misappropriation, the defendants created and issued false account statements that misrepresented trading returns purportedly earned by pool participants. When pool participants requested return of their funds, the defendants either ignored their requests, provided bogus promises and excuses, or engaged in conduct designed to delay payouts to Pool Participants for as long as possible.
CFTC Obtains Statutory Restraining Order
On April 28, 2022, Chief District Judge Kimberly J. Mueller entered a Statutory Restraining Order against the defendants, freezing their assets and permitting the CFTC immediate access to their books and records. In addition, the court scheduled a Preliminary Injunction hearing for May 11, 2022.
In continuing its litigation, the CFTC seeks full restitution to the defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act, as charged. The CFTC cautions that orders requiring repayment of funds to victims may not always result in the recovery of lost money because the wrongdoers may not have sufficient funds or assets.
The CFTC thanks the US Marshalls in the Eastern District of California for their assistance in this matter.
Division of Enforcement staff members responsible for this case are W. Damon Dennis, Sarah Wastler, Maura Viehmeyer, Erica Bodin, James H. Holl, III and Rick Glaser.
CFTC’s Forex Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories and Articles that provide the warning signs of fraud, including the Foreign Currency (Forex) Trading Fraud Advisory, which alerts customers to forex fraud and lists simple ways to spot forex scams.
The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.