May 4, 2011
CFTC Charges Michigan Man Jeffrey L. Groendyke with Operating a Foreign Currency Ponzi Scheme and Misappropriating Customer Funds
Federal court issues order freezing assets held in Groendyke’s trading accounts and preserving books and records.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action charging Jeffrey L. Groendyke of Middleville, Mich., doing business as JG Forex Fund (JGF), with fraud and misappropriation in connection with an off-exchange foreign currency (forex) Ponzi scheme that defrauded at least 54 customers of at least $953,305 since May 2010. Groendyke has never been registered with the CFTC in any capacity.
The CFTC complaint charges Groendyke with misappropriating at least $600,000 of customer funds for purposes other than forex trading. For example, he used customer funds to pay existing customers’ purported forex trading profits as is typical of a Ponzi scheme. Groendyke also used customer funds to trade futures contracts in a personal trading account undisclosed to customers, according to the complaint.
On May 3, 2011, the same day the complaint was filed, Judge Robert J. Jonker, of the U.S. District Court for the Western District Michigan, issued an emergency order freezing assets held in Groendyke’s trading accounts and prohibiting the destruction of books and records.
Specifically, the complaint alleges that Groendyke solicited and accepted funds to trade forex primarily from individuals he knows through the church he attends in Middleville. He allegedly represented to prospective customers that he is a successful trader with a profitable track record and offers a “long term investment” suitable for retirement funds.
Groendyke allegedly misrepresented to customers that his forex trading earned monthly profits ranging from 6.37 percent to 42 percent. In reality, Groendyke used less than half of the funds solicited to trade forex and lost more than 88 percent of those funds trading, according to the complaint. To conceal his fraud, Groendyke provided false account statements to customers, showing that, as of December 31, 2010, he had $1,548,679 under management when, in fact, his forex accounts combined held a balance of less than $100 as of December 31, 2010, according to the complaint.
In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans and permanent injunctions against further violations of the federal commodities laws.
The CFTC Division of Enforcement staff members responsible for this case are Susan Gradman, Joseph Patrick, Scott Williamson, Rosemary Hollinger and Richard Wagner.
Last Updated: May 4, 2011