For Release: April 12, 2007
Nine Defendants from “Operation Wooden Nickel” Ordered to Pay Restitution, Return Ill-Gotten Gains, and Pay Fines Totaling More Than $14,000,000
Judge Finds That Defendants Committed Fraud through the Sale of Illegal Off-Exchange Foreign Currency (Forex) Futures Contracts
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable George Daniels of the United States District Court for the Southern District of New York entered orders imposing monetary sanctions and other relief totaling more than $14 million against nine defendants. These orders stem from a cooperative law enforcement investigation code-named “Operation Wooden Nickel” conducted by the CFTC, the Federal Bureau of Investigation, the Department of Justice, and the Securities and Exchange Commission.
These nine defendants and others were sued by the CFTC on November 18, 2003 (see CFTC News Release 4867-03), in six civil injunctive actions for engaging in fraud in the sale and solicitation of illegal foreign currency (forex) futures contracts. In late 2006, Judge Daniels entered orders imposing monetary sanctions totaling more than $25 million, permanent injunctions and other relief against 15 other defendants (see CFTC News Release 5265-06).
Madison Deane, et al., Docket No. 03-CV-9128
The Court entered default judgments and sanctions against defendants Madison Deane & Associates, Inc., a New York corporation, Madison Deane Asia Corporation, a Delaware corporation, ISB Clearing Corporation, a Delaware corporation that was registered with the CFTC as a Futures Commission Merchant, Free Star Capital, Inc., a Delaware corporation, William Holbrook & Associates, LLC, a New York limited liability corporation, Oxford Capital Group, LLC, a New York limited liability corporation, and George Omeste, a New York resident. The Court found that these seven defendants fraudulently solicited millions of dollars from the retail public for the purpose of trading illegal off-exchange forex futures contracts and then misappropriated these customer funds. The Court ordered all defendants to disgorge their ill-gotten gains and pay $12,059,480 in restitution. Madison Deane & Associates, Inc., Madison Deane Asia Corporation, Free Star Capital, Inc., William Holbrook & Associates, LLC, Oxford Capital Group, LLC, and George Omeste were each ordered to pay a $240,000 civil monetary penalty. ISB Clearing Corporation was ordered to pay a $120,000 civil monetary penalty. In addition, the Court imposed permanent trading and registration bans against each of these defendants.
ISB Clearing Corporation, et al, Docket No. 03-CV-9127
The Court found that defendant ISB Clearing Corporation, a Delaware corporation that was registered with the CFTC as a Futures Commission Merchant, repeatedly filed financial reports with the National Futures Association that contained false statements about the amount and location of customer funds. The Court entered a default judgment and sanctions against ISB Clearing Corporation, imposed a $120,000 civil monetary penalty and ordered to be jointly and severally liable for the disgorgement and $12,059,480 in restitution ordered to be paid by its co-conspirators in the Madison Deane matter, Docket No. 03-CV-9128.
“Knowledgeable Trades”, Docket No. 03-CV-9125
The Court entered an Order for Entry of Injunctive Relief, Damages, and Ancillary Equitable Relief against Anthony DiNapoli, a New York resident, and a Consent Order of Permanent Injunction, Civil Monetary Penalty, and Other Equitable Relief settling the CFTC’s charges against John Messina, also a New York resident. The Court found that defendants Anthony DiNapoli and John Messina knowingly aided and abetted fraudulent forex trades by introducing co-conspirators to each other and by assisting in the transfer of cash from these illegal forex transactions to other co-conspirators. The Court ordered DiNapoli to pay restitution to defrauded victims of this scheme in the amount of $557,586. The Court also ordered DiNapoli to pay a $120,000 civil monetary penalty. The Court, which found that Messina received $15,000 from this scheme and caused losses to a bank in the amount of $235,000, assessed a $45,000 civil monetary penalty against Messina. The court also issued a permanent injunction against DiNapoli and Messina and permanently banned them from trading on markets subject to the Commission’s jurisdiction or registering with the Commission.
The CFTC would like to thank the FBI, the U.S. Attorney’s Office for the Southern District of New York, and the National Futures Association for their assistance.
The following CFTC staff members are responsible for this case: Joseph Rosenberg, Sheila Marhamati, John Cipriani, Phil Rix, Steven Ringer, Lenel Hickson, Stephen J. Obie, and Vince McGonagle.
Last Updated: April 17, 2007