July 28, 2011
CFTC Charges Susan G. Davis, David E. Howard II, Joseph Burgos, and their Companies with Fraud in Off-Exchange Foreign Currency Scheme
Federal court issues order freezing defendants’ assets and prohibiting destruction of books and records.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today charged Susan G. Davis of Jersey City, N.J. and St. Petersburg, Fla., David E. Howard II of Woodstock, Ga., and their New York companies, Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), and Joseph Burgos of Rutherford, N.J., and his company, Highland Stone Capital Management, LLC (Highland Stone), with fraudulently soliciting more than $1.3 million from at least 73 customers to trade off-exchange foreign currency (forex) contracts. None of the defendants has ever been registered with the CFTC, except for Davis who has been registered as an Associated Person of a different company, Forex Capital Trading Partners NA, Inc., since May 31, 2011.
On July 27, 2011, the same day the complaint was filed, Judge Richard J. Holwell of the U.S. District Court for the Southern District of New York issued an emergency order freezing the defendants’ assets and prohibiting the destruction of books and records. A preliminary injunction hearing is set for August 11, 2011.
The CFTC complaint alleges that beginning in at least April 2009, Davis, Howard, Burgos, and their companies, Forex Group, Forex Partners, and Highland Stone, fraudulently solicited customers to trade forex through accounts that the defendants managed at one of two foreign retail forex dealers. In soliciting customers, the defendants allegedly falsely claimed incredible profits spanning several years on their firms’ respective websites and elsewhere. Forex Group’s and Forex Partners’ managed customer accounts allegedly lost a combined sum of $224,824 but they reported a 149.35 percent return for 2009. These companies’ customers allegedly lost a total of $736,241 through October 2010, yet the defendants reported gains of 51.94 percent for 2010. The defendants also allegedly provided prospective customers with purportedly verified account statements that falsely reported profitable results for past managed account customers, according to the complaint.
The defendants also allegedly falsely assured customers that Burgos was a successful forex trader and that customers’ accounts would be carefully managed by Burgos, Davis, and Howard to minimize the risk of loss. In fact, customers ultimately lost more than 86 percent of their overall invested principal through the forex trading, and between May 2009 and October 2010, customers’ accounts had losses in 78 percent of the months that defendants traded their accounts, according to the complaint.
In its continuing litigation, the CFTC seeks restitution to defrauded customers, rescission of contracts, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the anti-fraud provisions of federal commodities laws.
The CFTC appreciates the assistance of the U.K. Financial Services Authority.
The following CFTC Division of Enforcement staff members are responsible for this action: Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser; Trevor Kokal; Janine Gargiulo; Scott Williamson, Rosemary Hollinger and Richard B. Wagner.
Last Updated: July 29, 2011