For Release: April 22, 2008
U.S. District Court Orders Two New York Residents and a New York Firm to Pay More Than $11 Million for Their Roles in Defrauding Investors in Foreign Currency (Forex) Schemes
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that it obtained default judgment orders requiring Maxim Yampolsky of New York, New York, Frank Schiavone of Howard Beach, New York, and First Lexington Group, LLC, a New York company, to pay more than $11 million in civil monetary penalties, disgorgement, and restitution due to their roles in defrauding investors in illegal foreign currency (forex) schemes.
The three default judgment 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.
Yampolsky, Schiavone, FLG, 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 forex futures contracts. In 2006 and 2007, Judge Daniels entered orders imposing monetary sanctions totaling more than $39 million, permanent injunctions, and other relief against 24 other defendants (see CFTC News Releases 5265-06 and 5315-07).
Specifically, the default judgment orders entered by the United States District Court for the Southern District of New York, require: Yampolsky to pay a civil monetary penalty of $1,875,081, Schiavone to pay a civil monetary penalty of $288,279, and to be jointly and severally liable with a co-conspirator for $6,800,951 in disgorgement and restitution, and FLG to pay a civil monetary penalty of $240,000, and $2,226,063 in disgorgement and restitution. The default orders also ban Yampolsky, Schiavone, and FLG from trading on markets subject to the CFTC’s jurisdiction or registering with the CFTC.
In the default judgment orders against Yampolsky and Schiavone, the court found that from January 1999 to April 2002, they intentionally made fraudulent misrepresentations regarding the actual trading of much of their customers’ funds, issued false account statements to customers showing considerable profits, and then told customers that catastrophic trading losses had wiped out their funds. The default judgment order against FLG found that from August 2002 to March 2003, FLG fraudulently solicited customers for the purpose of trading managed forex contracts, created and provided fictitious account statements to customers reflecting trades that never took place, and defrauded customers of $2,226,063.
The CFTC would like to thank the FBI, the U.S. Attorney’s Office for the Southern District of New York, and the SEC for their assistance.
The following CFTC staff members are responsible for this case: Sheila Marhamati, Joseph Rosenberg, Philip Rix, Steven Ringer, Lenel Hickson, Stephen Obie, and Vincent McGonagle.
Last Updated: April 22, 2008