For Release: August 20, 2009
CFTC and the State of California Charge San Diego Forex Firm MAK 1 Enterprises Group, LLC and Its CEO Mohit A. Khanna in Multi Million Dollar Scam
Defendants falsely claimed to have $50 - $500 million or more in assets as funds were being depleted.
Washington, DC –The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 17, 2009, it filed a joint action in federal court in San Diego with the Commissioner of Corporations for the State of California, charging MAK 1 Enterprises Group, LLC, (MAK 1) and Chief Executive Officer Mohit A. Khanna (Khanna), both of San Diego, Calif., with fraudulently soliciting at least $16.4 million from at least 122 individuals purportedly to trade foreign currency (forex) on their behalf, misusing client funds to pay off other clients and for personal use, and issuing false statements to conceal their fraud as they continued to solicit funds.
The court, on August 18, 2009, entered an emergency restraining order freezing assets under the control of defendants, preserving records and appointing a receiver to take control of the assets.
The complaint charges that defendants fraudulently solicited funds from individuals located primarily in southern California by: (1) guaranteeing returns of 40% to 50%; (2) reassuring clients that investments with MAK 1 were protected against loss by MAK 1 insurance policies; (3) claiming to have $50 million in assets and at other times $500 million or more in assets; (4) claiming to be experienced traders with a consistent six-year track record of double-digit returns; 5) failing to adequately disclose the risks of trading off-exchange leveraged foreign currency contracts; and (6) failing to disclose that, in 2004, Khanna was barred from associating with any member of National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority, for allegedly luring investments from clients through alleged false misrepresentations.
Defendants have not met redemption requests or returned funds to many MAK 1 clients. In late February, 2009, Khanna tried to reassure clients by claiming that MAK 1 has prospered for six years despite the negative market conditions. Khanna provided a letter from a purported accountant for MAK 1 stating that MAK 1 records show $50 million in assets. At that time, MAK 1 bank accounts had less than $200,000.
Upon information and belief, Defendants operated a “Ponzi” scheme by paying so-called returns to clients with those clients’ own money or the money of other clients. Defendants also misappropriated client funds for personal use, including making payments for several luxury vehicles and mortgages. Defendants also channeled at least some funds from a MAK 1 bank account into a bank account in the name of another Khanna business, relief defendant First Opportunities Management Group, Inc. (First Opportunities). Defendants concealed their fraud through false statements to clients showing the promised returns.
The Honorable Roger T. Benitez of the United States District Court for the Southern District of California also entered an order to show cause against the defendants as to why a preliminary injunction should not be entered and has set a hearing for August 31, 2009, at 4:00 pm, PDT.
In the continuing litigation, the CFTC and the State of California seek restitution, disgorgement, civil monetary penalties and permanent injunctions against further violations of the federal commodities laws and against further trading.
The CFTC’s Division of Enforcement thanks the State of California, Department of Corporations and the Securities and Exchange Commission (SEC) for their assistance. The SEC filed a related action against the Defendants in the same court.
The following Division of Enforcement staff members are responsible for this case: Phyllis J. Cela, Gretchen L. Lowe, James H. Holl, III, Katherine Scovin Driscoll, Kara Mucha and Michelle Bougas.
Last Updated: August 20, 2009