Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it charged Gary D. Martin and his wife, Brenda K. Martin of St. Augustine, Fla. (collectively, the Martins), and their company, Queen Shoals Consultants, LLC (QSC), of Charlotte, N.C., with defrauding customers of more than $1.44 million through a retail foreign currency (forex) trading scheme. None of the defendants has ever been registered with the CFTC.
The complaint, filed in the U.S. District Court for the Western District of North Carolina on March 15, 2011, alleges that, since at least June 18, 2008, to August 7, 2009, the defendants fraudulently solicited approximately $22,310,452 from individuals and/or entities purportedly to trade off-exchange forex contracts. The defendants allegedly solicited customers to trade forex and other financial instruments, using in-person solicitations, written materials, QSC’s website www.queenshoalsconsultants.com and third-party agents they called “consultants.”
The Martins allegedly represented to actual and prospective customers that they and QSC were financial experts with “vast experience” trading forex and other financial instruments on behalf of clients. In reality, the defendants had no expertise or experience in trading forex or any other commodity, according to the complaint. Aside from Gary Martin’s limited past employment selling insurance, the Martins and QSC had no past experience in, or connection to, financial services, according to the complaint.
The Martins also allegedly represented on the QSC website that their consultants “have a vast background in financial services.” Gary Martin admitted that this representation was false and that none had any experience trading forex. Moreover, Martin also admitted that a number of QSC consultants were actually former high school coaches, J.C. Penney sales clerks or insurance salesmen, among other vocations unrelated to the financial industry.
The Martins also allegedly represented to actual and prospective customers that they could not lose their principal investment and that there was “minimal risk” to funds invested with QSC. The Martins allegedly targeted customers at or near retirement who held individual retirement accounts (IRAs), luring them with promises of guaranteed annual returns of between eight to 24 percent generated by trading forex and other instruments. The Martins also guaranteed an “additional 1%” to customers who held IRAs and agreed to rollover their IRAs into the defendants’ scheme. All of these representations were false, the defendants had no trading accounts, no forex trading occurred and no profits were ever realized, according to the complaint.
Unknown to customers, the Martins 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, the complaint alleges. Hanson allegedly paid the Martins at least $1.44 million in such undisclosed “referral fees.”
In its continuing litigation, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans and permanent injunctions against further violations of the federal commodities laws.
The CFTC appreciates the assistance of the State of North Carolina Department of the Secretary of State, Securities Division. The CFTC Division of Enforcement staff members responsible for this case are Timothy J. Mulreany, Sophia Siddiqui, Michael Amakor, Paul Hayeck and Joan Manley.
Hanson Pled Guilty in Criminal Matter and Is in Federal Custody
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 of the Western District of North Carolina) for acts arising out of his operation of the Queen Shoals Group, among other entities. Hanson is currently in federal custody awaiting sentencing, scheduled for March 31, 2011.
In addition to the criminal case above, Hanson is a defendant in CFTC v. Queen Shoals, LLC, Case No. 09-CV-335 RJC, filed in the U.S. District Court of the Western District of North Carolina. The CFTC charged Hanson and other defendants, all of Charlotte, N.C., with operating a Ponzi scheme involving more than $22 million in connection with off-exchange forex futures trading (as to the CFTC action, which is still in litigation, see CFTC Press Release 5689-09, August 7, 2009).