February 28, 2014
CFTC Obtains Permanent Injunction Orders and Monetary Sanctions against Susan G. Davis, David E. Howard II, and Joseph Burgos for Fraudulent Solicitation of Managed Foreign Currency Trading Accounts
Court orders Defendants to pay nearly $907,600 in equitable relief and a monetary sanction and permanently bars them from the commodities industry
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered Consent Orders for permanent injunction against Defendants Susan G. Davis of Jersey City, N.J. and David E. Howard II of New York, N.Y., and a Supplemental Order assessing monetary damages against Defendant Joseph Burgos of Rutherford, N.J. Previously, on October 29, 2013, the court entered a permanent injunction Order against Burgos that imposed permanent trading and registration bans against him. The court’s Orders require Davis, Howard, and Burgos jointly and severally to pay restitution of $407,599.87 for the benefit of defrauded customers and a $500,000 civil monetary penalty, with Davis’s and Howard’s individual liability for the civil monetary penalty limited to $250,000. The Orders also impose permanent trading and registration bans against Davis and Howard and prohibit them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The court’s Orders, entered on February 26, 2014, stem from a CFTC anti-fraud enforcement action filed on July 27, 2011 against Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J., and Davis and Howard, principals of Forex Group and Forex Partners, and Burgos, principal of Highland Stone (see CFTC Press Release 6083-11). The court entered a default judgment against the three companies on November 30, 2012, which ordered them to pay $450,764 for the benefit of defrauded customers and assessed a civil monetary penalty against them of three times that amount, $1,352,293 (see CFTC Press Release 6444-12).
The court’s Orders find that Davis, Howard, and Burgos fraudulently solicited 106 customers, who invested almost $2.9 million to trade foreign currency (forex) through accounts that the Defendants managed at one of two foreign retail forex dealers. In soliciting customers, Defendants falsely claimed on their websites and elsewhere that profits had been made for their customers for a period of several years, including, for example, a false reported gain of 51.94 percent in 2010 when, in fact, their customers lost more than $1.2 million that year. In the end, their customers ended up losing more than 93 percent of their overall invested principal through forex trading, according to the Orders. The court’s Orders also find that the Defendants distributed falsified account statements showing profitable trading to prospective customers. In addition, the court found that Davis, Howard, and Burgos acted in capacities requiring registration with the CFTC, but were not registered.
The CFTC appreciates the assistance of the U.K.’s Financial Conduct Authority.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
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CFTC’s Foreign Currency (Forex) Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.
Last Updated: February 28, 2014