October 23, 2012
CFTC Orders San Gabriel, California Resident David Kaup and His Companies to Pay over $1.89 Million in Restitution and Penalties to Settle Forex Fraud and Misappropriation Charges
Kaup and his companies, Lunden Forex Partners, LP, Lunden Forex Management, LLC, Black Horse Funds, LLC, Black Horse Management, LLC, and Black Horse Partners, LP, defrauded investors out of almost $1.4 million
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed and simultaneously settled charges against David Kaup of San Gabriel, Calif., and his California-based companies, Lunden Forex Partners, LP, Lunden Forex Management, LLC (Lunden Entities), Black Horse Funds, LLC, Black Horse Management, LLC, and Black Horse Partners, LP (Black Horse Entities). The CFTC charged that they fraudulently solicited individuals with false claims of a profitable trading history for the purpose of trading leveraged or margined off-exchange foreign currency (forex) contracts, misappropriated customer funds, and issued false statements to conceal trading losses and the fraud.
The CFTC order, filed on October 22, 2012, requires Kaup, the Lunden Entities, and the Black Horse Entities jointly and severally to pay a $500,000 civil monetary penalty and restitution of $1,396,316. The order permanently prohibits Kaup, the Lunden Entities, and the Black Horse Entities from engaging in certain commodity-related activities, including trading, and from registering or seeking exemption from registration with the CFTC. The order also permanently prohibits the respondents from further violations of anti-fraud provisions of the Commodity Exchange Act, as charged.
Specifically, the order finds that from about August 2008 through October 2009, Kaup, first through the Lunden Entities and then through the Black Horse Entities, all companies he controlled, fraudulently solicited and accepted at least $1.7 million from at least 24 customers to trade forex contracts. In soliciting potential customers, Kaup falsely claimed that he had a trading track record of earning monthly profits of from 5 percent to 30 percent, provided fraudulent documents to potential customers showing a successful forex trading history, and guaranteed customers monthly profits of from 5 to 10 percent, the order finds. Moreover, the respondents misappropriated customers’ funds to make payments to other customers and to pay Kaup’s personal expenses, the order finds.
Kaup, through the Lunden Entities and the Black Horse Entities, concealed their trading losses and misappropriation of customer funds by assuring customers that their investments were profitable and by issuing false account statements, the order finds. As a result of this scheme, investors were defrauded in the amount of almost $1.4 million.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Pennsylvania Securities Commission, and the Securities and Exchange Commission.
CFTC Division of Enforcement staff members responsible for this case are Mark A. Picard, Philip Rix, Steven I. Ringer, Lenel Hickson, Stephen J. Obie and Vincent A. McGonagle.
Last Updated: October 23, 2012