Today the Commodity Futures Trading Commission (CFTC) announced the filing of a complaint in the United States District Court for the Eastern District of Michigan against Darren Robinson and his company The QYU Holdings Inc.  According to the complaint, the Defendants engaged in a type of fraud that has become all too common lately: foreign currency (forex) investment scams.  The Defendants solicited the public to join a commodity pool for the purpose of investing in leveraged, margined, or financed forex pairs and forex futures contracts.  Rather than invest the money in forex as promised, Robinson instead invested it in luxury cruises, vehicles, real property, airfare, and other daily expenses for himself.  Of the roughly $7 million that he received from 30 victims, about $1.2 million was used to make payments to earlier investors as “profits” of the trading, in the manner of a Ponzi scheme.

Indeed, this case is not even the first forex investment fraud case brought by the Commission this week.  On September 26, the CFTC charged Patrick Wonsey in the United States District Court for the Middle District of Florida for operating the same kind of scheme.  According to the complaint, Wonsey solicited individuals with misrepresentations about his track record of success, his ability to limit the riskiness of the investments, and the frequency at which he would pay investors their trading profits.  He was able to collect at least $3.4 million from at least 50 individuals.  But as with Robinson and QYU, he used the vast majority to line his pockets.  The complaint alleges that Wonsey spent hundreds of thousands on diamonds, apartment leases, boats, and other luxury items.  He transferred nearly $2 million to his personal bank accounts, and withdrew nearly $350,000 in cash. Roughly $700,000 was used to pay earlier-in-time investors their “profits,” again in the manner of a Ponzi scheme.  What little trading Wonsey did do was disastrous, resulting in a loss of about $300,000.

I have been raising warning flags about this type of scheme for some time.[1]  Time and again, fraudsters have been able to attract credulous investors with dreams of big returns and little risk, guaranteed by the charisma of the perpetrators and nothing more.  Couching the investment scheme in forex adds a sheen of exoticism and technical expertise that seems to engender a heightened level of trust among the victims.  But at bottom, the schemes are the same as the precious metals[2] and digital asset[3] frauds I highlighted this week: too good to be true. Investors must remain on guard against these frauds, and I strongly encourage the public to stay informed about scams and abuses in forex markets by visiting the CFTC’s investor advisory page.[4]

I commend the Division of Enforcement staff who investigated these cases and are pursuing justice in litigation, in particular George Malas, Kevin Samuel, Kelly M. Folks, Kassra Goudarzi, Sean Hennessy, Timothy J. Mulreany, Alison B. Wilson, Paul G. Hayeck, and Rick Glaser.