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Opalesque Futures Intelligence

Regulators: Recent foreign exchange-related fraud cases: defendants include a pastor and an ex con.

Monday, September 20, 2010

Regulator Focus on Forex Continues

This month the Commodity Futures Trading Commission announced a new development in a series of enforcement actions against fraud related to foreign exchange trading. The regulator has been going after forex schemes since 2009.

The latest is a summary judgment in a federal court against Marvin Cooper and his company, Billion Coupons, of Honolulu, Hawaii. According to the CFTC, Mr. Cooper operated a $4 million foreign currency and commodity futures Ponzi scheme that defrauded more than 125 customers, prying in particular on the deaf.

He solicited money from deaf American and Japanese individuals, with promises of 15% to 25% monthly returns from trading forex, the regulator alleges. He is also accused of misappropriating customers' funds for personal use, including payments for flying lessons and a $1 million house. Mr. Cooper is himself deaf.

The court ordered him and Billion Coupons to pay $6.2 million in disgorgement and civil penalties.

Pastor Accused of Scheme

Another alleged forex scheme emerged in August. The CFTC obtained an emergency court order freezing assets held by Jeremiah Yancy of Atoka, Oklahoma, and his company, Longbranch Group International LLC of Houston, Texas. The court order also granted the CFTC immediate access to the defendants' books and records.
Mr. Yancy allegedly operated a Ponzi scheme claiming to invest in off-exchange foreign currency contracts and solicited more than $1 million from at least 36 people, including members of the church in which he was pastor. He told potential customers that he managed forex trading for non-profit organizations, including churches and orphanages.
According to the complaint, he promised prospective customers monthly returns of 20% to 40% from forex trading and falsely told some of them that their principal would be guaranteed.

In addition, he sent account statements from demonstration forex trading accounts showing high returns from accounts supposedly containing up to $10 million traded by him and the company, without telling the customers that these accounts were for demonstration and did not represent actual trading.

Ex Con Ran CTA-CPO

In late July the CFTC charged Robert Mihailovich Sr. and Growth Capital Management LLC of Rockwall, Texas, with fraudulent solicitation in connection with commodity futures contracts and leveraged foreign currency trading. He is a felon who was on supervised release while he was soliciting for and operating Growth Capital.

Growth Capital is a registered commodity trading adviser and commodity pool operator under the name of Mr. Mihailovich's son, Robert Mihailovich Jr. The latter is accused of making false statements in regulatory filings because he failed to disclose that his father was a controlling principal of the CTA-CPO.

The regulator says that since at least June 2008 Growth Capital and Mihailovich Sr. fraudulently solicited and accepted more than $30 million from around 93 customers, to invest in futures and forex through discretionary accounts. Mihailovich Sr. made false representations claiming to be a successful commodity futures trader with no losing trades.

Moreover, he failed to disclose to customers that he had a federal felony conviction for mail fraud, had served 27 months in prison and was on a three-year supervised release.



 



 
This article was published in Opalesque Futures Intelligence.
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