Fore Release: October 24, 2008
California Resident Jinsup Choi Ordered to Pay More than $10 Million in Restitution and a $1 Million Monetary Penalty for Defrauding Investors in a “Ponzi” Scheme Involving Commodity Futures Contracts
Washington, DC — On October 22, 2008, the Honorable A. Howard Matz, United States District Court, Central District of California, approved a Consent Final Order of Permanent Injunction, Civil Monetary Penalty and Other Equitable Relief against California resident Jinsup Choi based on findings that he defrauded approximately 83 persons of $19 million in a “Ponzi” scheme involving commodity futures contracts. In addition to entering a permanent injunction and registration and trading bans against Choi, Judge Matz ordered Choi to pay restitution in the amount of $10,035, 614 and a civil monetary penalty of $1,000,000.
The order follows the August 27, 2008, filing of a complaint by the CFTC, in conjunction with the Commissioner of Corporations of the State of California (California), seeking a permanent injunction, a civil monetary penalty, and other equitable relief for violations of the Commodity Exchange Act (CEA) and the California Commodity Law of 1990. Specifically, the complaint alleged that, from at least June 2002 through April 2007, Choi, among other things, fraudulently solicited members of the retail public in connection with futures contracts, and, thereafter, stole the customers’ monies.
According to the order, Choi, doing business as Futures Investment Group, solicited approximately $19 million from approximately 83 individuals in around the Los Angeles, California area to purchase futures by falsely representing to customers that:
- their funds would be pooled with the funds of other customers for the purpose of engaging in futures trading;
- falsely guaranteeing customers that he could earn eight to ten percent profit per month trading in futures and that Choi would split evenly such profits with the customers;
- falsely promising customers that he could reduce their risk of loss to ten percent by employing a ten percent stop-loss on each futures transaction; and
- failing to disclose that he converted customer funds to his own personal use.
To lull customers into a false sense of security that their funds were secure and not at risk and to prevent customers from complaining to federal and/or state authorities, Choi mailed false account statements to his customers. Choi did not generate any profits from engaging in futures transactions, but rather Choi conducted a large “Ponzi” scheme by paying alleged interest and profits to customers totaling approximately $9 million with monies paid to Choi by other customers and falsely told customers that the interest and profits paid to them were generated from futures transactions. Choi also used customers’ monies to purchase jewelry, luxury automobiles, a yacht, and a home, among other personal items and services.
The CFTC’s action relates to the criminal action U.S. v. Jinsup Choi, aka Gene Choi, Cr. No. 08-00108, C.D. Calif. On January 28, 2008, Choi pleaded guilty on a two count Information charging wire fraud violations for: (1) devising a scheme or plan for obtaining money or property by making false promises or statements; (2) knowingly making false promises or statements; (3) that were material in that they would reasonably influence a person to part with money or property; (4) acting with the intent to defraud; and (5) using, or causing to be used wires in interstate commerce to carry out the scheme.
The CFTC appreciates the assistance of the United States Attorney’s Office for the Central District of California, the FBI and the Commissioner of Corporations for the State of California.
The following CFTC Division of Enforcement staff members are responsible for this case: Kathleen Banar, Kim Bruno, Richard Foelber, Rick Glaser and Richard Wagner.
Last Updated: October 24, 2008