CFTC Charges Jeffery A. Lowrance and His Company, First Capital Savings and Loan, with Operating a Million Dollar Foreign Currency Ponzi Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it charged Jeffery Alan Lowrance formerly of Houston, Texas, and his New Zealand-registered company, First Capital Savings and Loan (FCSL), with operating a Ponzi scheme that fraudulently solicited at least $1 million from approximately 36 members of the general public to trade off-exchange foreign currency (forex) contracts. Defendants allegedly have misappropriated most of these funds.
The CFTC complaint, filed in the U.S. District Court for the Northern District of Illinois on July 14, 2011, alleges that, from at least June 18, 2008 to the present, Lowrance and FCSL in their solicitations falsely claimed to be successful forex traders and promised customers fixed monthly returns ranging from 1.1 percent to at least 4.15 percent on their investment. To conceal and perpetuate their fraud, the defendants allegedly provide their customers with access to bogus account statements that falsely show that their accounts are increasing by as much as 4.15 percent per month.
According to the complaint, the defendants deposited no customer funds into forex trading accounts and have little experience trading actual money in forex. Rather, the defendants allegedly misappropriated customer funds to create a religious newspaper, pay personal expenses, and provide funds to Lowrance’s family members. The defendants also allegedly used customer funds to pay existing customers’ purported forex trading profits or for the return of principal, as is typical of a Ponzi scheme.
On August 5, 2010, Lowrance was indicted on federal fraud charges in connection with the operation of FCSL and Mentor Investing Group, Inc., which solicited members of the public to invest in forex through the Internet and mass mailings. On February 3, 2011, the Peruvian National Police – Interpol arrested Lowrance in Lima, Peru, and he was extradited to the United States on July 14, 2011. Lowrance was arraigned on the federal fraud charges on July 15, 2011 and is currently detained by Federal authorities.
The CFTC coordinated its investigation with the U.S. Attorney’s Office for the Northern District of Illinois. The CFTC also appreciates the assistance of the Securities and Exchange Commission, which filed a related action against Lowrance and FCSL in the Northern District of California on July 14, 2011.
In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws.
CFTC Division of Enforcement staff members responsible for this case Jennifer S. Diamond, Elizabeth M. Streit, Joy McCormack, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.
SEC Charges Forex Ponzi Operator Who Fled After Scheme Unraveled
Washington, D.C., July 15, 2011 – The Securities and Exchange Commission filed fraud charges Thursday against the CEO of a purported foreign currency trading firm, alleging he scammed hundreds of investors with false promises of high, fixed-rate returns while secretly using their money to fund his start-up alternative newspaper.
First Capital Savings & Loan Ltd. Chief Executive Jeffery A. Lowrance, who had fled to Peru and was arrested there earlier this year, was arraigned today on criminal fraud charges in a 2010 indictment filed by the United States Attorney’s Office for the Northern District of Illinois. In addition, the Commodity Futures Trading Commission filed fraud charges Thursday against Lowrance and First Capital.
The SEC alleges that Lowrance raised approximately $21 million from investors in at least 26 states, including California, Oregon, Illinois and Utah, by promising huge profits from a specialized foreign currency trading program. First Capital actually conducted little foreign currency trading, lost money on the little trading that it conducted, and never engaged in any profitable business operations. Lowrance targeted certain investors by purporting to share their Christian values and their limited-government political views. He solicited investors through, among other things, ads in his start-up newspaper USA Tomorrow, which he distributed at a September 2, 2008 political rally in Minneapolis, Minnesota.
“Lowrance ironically portrayed himself as a crusader against corruption in government, while he ripped off investors who put their trust in him,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office.
According to the SEC’s complaint, filed in federal district court in San Jose, California, Lowrance and First Capital promised investors a “predictable monthly income,” with monthly returns up to 7.15 percent through foreign currency trading. Some investors were told their investments were guaranteed and were given bogus letters of credit. First Capital also published a spreadsheet purporting to show its multi-year history of profitable trades, but the trades were fictitious, the SEC alleged. Instead of engaging in foreign currency trading as claimed, the SEC said Lowrance and First Capital secretly diverted investor funds to pay fake returns to earlier investors, to pay Lowrance (despite his failure to earn a profit for the investors), and to fund his newspaper.
Lowrance’s scheme began to unravel in June 2008 and Lowrance and First Capital had lost all of the investors’ money by September 2008. Nevertheless, Lowrance solicited at least an additional $1 million from at least 36 investors between June 2008 and February 2009 by continuing to tout First Capital’s fictitious high returns, the SEC alleged.
The SEC’s lawsuit seeks court orders prohibiting the defendants from engaging in securities fraud and requiring them to disgorge their ill-gotten gains and pay financial penalties.
Erin E. Schneider, Robert S. Leach, and Cary Robnett of the SEC’s San Francisco Regional Office investigated the case.
The SEC acknowledges the assistance and cooperation of the Commodity Futures Trading Commission, the U.S. Attorney’s Office for the Northern District of Illinois, and the Federal Bureau of Investigation.