March 29, 2011
U.S. District Court Orders Texas Man Willie Lee Cloud, Jr. and his Company, C & R Financial, Inc., to Pay More than $5.35 Million in Restitution and a Civil Monetary Penalty for Operating a Foreign Currency Ponzi Scheme
Cloud pled guilty to Texas criminal felony charge and faces sentencing on April 20.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court entered a default judgment order requiring defendants Willie L. Cloud, Jr. and his company, C & R Financial, Inc., both of Houston, Texas, to pay restitution of $280,170.66 and a $5,070,000 million civil monetary penalty for operating an off-exchange foreign currency (forex) Ponzi scheme. The order stems from a CFTC complaint filed on March 4, 2010, that charged the defendants with violating the anti-fraud provisions of the Commodity Exchange Act (see CFTC Press Release 5791-10).
The order, entered on March 24, 2011, by Judge Gray H. Miller of the U.S. District Court for the Southern District of Texas, permanently bans the defendants from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.
The order finds that Cloud and C & R Financial, Inc., from at least January 2008 to January 2010, solicited more than $585,000 from at least 37 members of the public to trade off-exchange forex contracts, luring them with false promises of enormous returns through defendants’ forex trading. However, the order finds that the defendants traded only some customer funds and lost the majority of the funds — approximately $98,000 — trading forex. According to the order, the defendants transferred the remaining money, approximately $85,000, from the trading accounts into Cloud’s personal bank account.
The order also finds that the defendants misappropriated at least $280,000 of customer funds for a variety of personal and business expenses, including child support payments, anger management sessions, hundreds of meals, a 1971 Oldsmobile and cash withdrawals of approximately $148,000.
Additionally, the order finds that the defendants paid purported profits to customers that “must have come from the principal of other existing or subsequent customers.” Thus, the court concluded that the defendants operated a Ponzi scheme.
To conceal their trading losses and misappropriation, the defendants provided customers with false account statements that did not reflect the defendants’ substantial trading losses but, rather, reported rates of return ranging from eight to 259 percent for periods of five to six months.
On March 26, 2010, the Harris County, Texas District Attorney’s Office indicted Cloud with Misapplication of Fiduciary Property, a felony, in Texas District Court (Case No. 125669201010-3(2010)). Cloud pled guilty on March 17, 2011, and faces sentencing on April 20, 2011.
The CFTC appreciates the assistance of the Harris County, Texas District Attorney’s Office.
CFTC Division of Enforcement staff responsible for this case are Andrew Ridenour, Patrick Pericak, Jessica Harris, Michael Loconte, Kenneth McCracken, Rick Glaser and Richard Wagner.
Last Updated: March 29, 2011