August 8, 2011
Federal Court Finds that St. Augustine, Florida, Couple and Their Company Defrauded Customers in Off-Exchange Foreign Currency Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that it obtained a federal court consent order finding that defendants Gary D. Martin and Brenda K. Martin (the Martins) of St. Augustine, Fla., and their company, Queen Shoals Consultants, LLC (QSC), defrauded customers in an off-exchange foreign currency (forex) scheme.
The consent order, entered by Chief Judge Robert J. Conrad, Jr. of the U.S. District Court for the Western District of North Carolina, Charlotte Division, imposes permanent trading and registration bans on the Martins and QSC. The order requires the defendants to make full restitution “to all persons who gave funds, either directly or indirectly, to Defendants as a result of the course of the illegal conduct” charged in the CFTC complaint. The order also requires the defendants, jointly and severally, to pay a civil monetary penalty to be determined later by agreement between the CFTC and the defendants.
The order stems from a CFTC complaint filed on March 15, 2011, charging that the Martins and QSC, from at least June 18, 2008 to August 7, 2009, fraudulently solicited approximately $22.3 million from individuals and/or entities purportedly to trade forex contracts. The defendants allegedly solicited customers to trade forex and other financial instruments using in-person solicitations, written materials, a QSC website, and third-party agents. (See CFTC Press Release 6004-11, March 17, 2011.)
According to the order, the website created by the Martins “lured customers by claiming QSC and the Martins had a ‘vast background in financial services’ with over 20 years experience in financial services and a staff of experts ready to assist customers.”
In reality, the order finds, the defendants had no expertise or experience in trading forex, and all of the representations concerning trading, guaranteed profits, and profitable accounts were false. Gary Martin admitted under oath that the defendants never engaged in any forex trading or investing on behalf of customers and that there were no forex accounts, according to the order.
The order also finds that all of the representations made by the Martins and on QSC’s website that trading forex was secure and subject to minimal risk were false.
According to the complaint, the Martins, unknown to customers, turned over all customer funds to Sidney S. Hanson, an undisclosed third party, in return for a referral fee of up to five percent of each customer’s initial and subsequent investment. Hanson allegedly paid the Martins at least $1.44 million in such undisclosed referral fees, the complaint alleged. On August 4, 2009, the CFTC charged Hanson and other defendants with operating a Ponzi scheme involving more than $22 million in connection with off-exchange forex trading (see CFTC Press Release 5689-09, August 7, 2009).
Hanson pled guilty to securities fraud and mail fraud in the criminal matter United States v. Sidney Stanton Hanson, Case No. 09-CR-09CR139-RJC (U.S. District Court for the Western District of North Carolina) for acts arising out of his operation of the Queen Shoals Group, among other entities. Hanson was sentenced on April 1, 2011 to 22 years in prison and ordered to pay $33 million in restitution to victims of the Ponzi scheme.
The CFTC appreciates the assistance of the North Carolina Department of the Secretary of State, Securities Division.
CFTC Division of Enforcement staff members responsible for this case are Timothy J. Mulreany, Sophia Siddiqui, Michael Amakor, Paul Hayeck and Joan Manley.
Last Updated: August 8, 2011