For Release: September 9, 2009
CFTC Charges North Carolina Foreign Currency Firm CapitalStreet Financial LLC and its Principal Sean F. Mescall with Operating a $1.3 Million Forex Ponzi Scam
Defendants allegedly misappropriated approximately $875,000 in customer funds for personal use and to further the scheme; federal court freezes defendants’ assets, protects books and records, and appoints a Receiver.
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today charged CapitalStreet Financial LLC (CSF) and Sean F. Mescall, both of Charlotte, N.C., with operating a Ponzi scheme involving the fraudulent solicitation of at least $1.3 million from at least 69 customers in connection with foreign currency (forex) trading. Defendants are also charged with misappropriating approximately $875,000 of customer funds.
On September 9, 2009, the same day the complaint was filed, the Honorable Robert J. Conrad, Jr. of the U.S. District Court for the Western District of North Carolina, Charlotte Division, entered an order freezing the defendants’ and relief defendants’ assets, protecting books and records and scheduling a preliminary injunction hearing in the matter on September 16, 2009.
[On September 16, subsequent to the issuance of this Press Release, the court appointed a Receiver in the action. Customers should contact the Receiver, Joseph Grier, Esq. at (704) 375-3720 or visit www.grierlaw.com.]
Specifically, the CFTC complaint charges that, since at least September 2006 through the present, defendants fraudulently operated a forex trading scheme, luring customers to trade managed or pooled forex accounts by claiming forex trading success and promising quick and large returns, such as 60 percent to 80 percent annually. Defendants created the false impression that CSF was a well-established forex firm, in operation since 1999 with more than 35 offices in New York and North Carolina. In reality, defendants were not successful forex traders, sustained about $275,000 in trading losses, and opened CSF in or around August 2006 with four offices in the Charlotte area. Defendants provided customers with false monthly statements to conceal trading losses and their misuse of customer funds.
CFTC Lawsuit Names Two Relief Defendants
Defendants allegedly used the misappropriated customer funds to pay purported profits to customers as in a Ponzi scheme and for their personal use, including the living expenses of Mescall and relief defendant Gerald Mescall, a relative of Sean Mescall. Defendants provided customers with false monthly statements to conceal trading losses and misuse of customer funds. Defendants also directed funds to relief defendant Gaincapital, Inc., a company owed by Mescall.
Neither relief defendant provided any legitimate services or has a legitimate entitlement to any CSF customer funds. (Relief defendant Gaincapital is not related to GAIN Capital Group, LLC, a Futures Commission Merchant that is registered with the CFTC.)
Also today in a related action, the Securities Division of the Office of the North Carolina Secretary of State arrested Sean Mescall and executed search warrants at CSF and his home.
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties and permanent trading bans.
The CFTC thanks the Securities Division of the North Carolina Secretary of State for assistance in this matter.
The following CFTC Division of Enforcement staff are responsible for this case: August A. Imholtz III, Kara Mucha, Kassra Goudarzi, Michelle Bougas, Michael Solinsky, Gretchen L. Lowe and Phyllis J. Cela.
Last Updated: September 16, 2009