Release Number 8744-23
CFTC Charges Unregistered Michigan Commodity Pool Operator and its President with $13 Million Fraud
July 06, 2023
The complaint charges that from approximately January 1, 2017 to the present (relevant period), Foster and KEL solicited members of the public to participate in a commodity pool to trade in commodity interests, including foreign currency (forex) pairs and forex futures contracts, on a leveraged, margined, or financed basis with participants who are not eligible contract participants.
During the relevant period, instead of trading pool participants’ funds as promised, Foster and KEL misappropriated all of the pool participants’ funds by depositing them into KEL’s corporate bank accounts rather than depositing them into an account in the name of the pool at a futures commission merchant and/or a retail foreign exchange dealer. Foster and KEL misappropriated, and continue to misappropriate, participants’ funds to pay Fosters’ personal expenses, including a car loan, insurance, credit cards, and other daily living expenses. Additionally, Foster and KEL used approximately $10.1 million of later-in-time participants’ funds to pay earlier-in-time participants purported “profits” and/or “redemptions” in a Ponzi-like scheme.
The complaint further charges that throughout the relevant period, KEL acted at all times as a commodity pool operator (CPO) without being registered with the CFTC as required, and Foster acted at all times as an associated person of a CPO without being registered with the CFTC as required. Also, KEL failed to make disclosures and keep and maintain books and records as required by a CPO.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of Michigan and the Federal Bureau of Investigation.
The Division of Enforcement staff responsible for this case are Timothy J. Mulreany, George H. Malas, Kassra Goudarzi, and Paul G. Hayeck.
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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 Trading (Forex) 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 an individual or company’s registration with the CFTC before committing funds. Customers should be wary of providing funds to an unregistered individual or 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 Commodity Exchange Act.