The following are from the CFTC...
Virginia Federal Court Orders Ronald W. Smith, Jr., Doing Business as Safeguard 3030 Investment Club, to Pay More than $3 Million in Forex Ponzi Scheme
In a related criminal proceeding, Smith pleaded guilty to federal criminal felony charges
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court in Virginia entered a final default judgment and permanent injunction against Ronald W. Smith, Jr. of Vansant, Va., doing business as Safeguard 3030 Investment Club (Safeguard). The court’s order, entered on April 16, 2012, by Judge James P. Jones of the U.S. District Court for the Western District of Virginia, requires Smith to pay a $2,008,251 civil monetary penalty and restitution of $1,064,923. The order imposes permanent trading and registration bans against Smith.
The order also requires the two relief defendants, Angela A. Duty Smith, Smith’s wife, and Tigre Systems, Inc., to disgorge ill-gotten gains that they received from Smith totaling $188,842 and $1,242, respectively.
The order stems from a CFTC enforcement action charging Smith with operating an off-exchange foreign currency (forex) Ponzi scheme and misappropriating customer funds (see CFTC Press Release 5784-10, February 26, 2010).
The order finds that, from at least January 2009 through February 2010, Smith, doing business as Safeguard, fraudulently solicited approximately $1.4 million from 74 individuals to trade off-exchange forex contracts. Smith solicited customers through a website and a web-posted video, claiming to be an experienced and successful forex trader. Smith also lured prospective customers with the prospect of earning a 30 percent return every 30 business days. To conceal his fraud, Smith provided customers with false account statements showing profitable trading, according to the order.
Moreover, the order finds that Smith did not deposit any customer funds into an actual forex trading account or use customer funds to trade forex contracts. Instead, Smith misappropriated all of the $1.4 million provided by customers to invest on their behalf, the order finds. Smith used misappropriated funds to pay earlier customers in a Ponzi-style scheme, to fund Tigre’s operations, and to pay personal expenses, including three Dodge automobiles, a pool and pool house, home furnishings, and multiple visits to the luxury Martha Washington Inn, the order finds.
In related criminal actions, on December 7, 2010, the U.S. Attorney’s Office for the Western District of Virginia indicted Smith, his wife, and Terrance K. Cunningham for multiple counts of wire fraud and money laundering, among other charges. On June 30, 2011, Smith pleaded guilty and on August 4, 2011, Angela Smith and Cunningham were found guilty of all counts before the jury. Smith, his wife, and Cunningham were sentenced on March 30, 2012, to prison terms of 11 years and three months, three years, and seven years, respectively.
The CFTC thanks the U.S. Attorney’s Office for the Western District of Virginia for their assistance.
CFTC Division of Enforcement staff members responsible for this case are Kassra Goudarzi, Melanie Bates, Kara Mucha, August A. Imholtz III, James A. Garcia, Michelle Bougas, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.
Next page: Crackdown in Colorado
Federal Court Orders Colorado Defendants Flint-McClung Capital LLC and Shawon McClung to Pay over $6 Million in CFTC Action Charging Them with Running Forex Ponzi Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the District of Colorado entered an order against defendants Flint-McClung Capital LLC(FMC), of Englewood, Colo., and Shawon McClung, formerly of Denver, Colo., requiring them jointly and severally to pay restitution of $1,701,250 and a $4.3 million civil monetary penalty. The order also imposes permanent trading and registration bans against the defendants.
The court’s order of default judgment and permanent injunction stems from a June 2011 CFTC enforcement action that charged FMC and McClung with fraud and misappropriation in an off-exchange foreign currency (forex) Ponzi scheme (see CFTC New Release 6063-11, June 30, 2011).
The order finds that, beginning in or about March 2010, the defendants fraudulently solicited and received at least $2.4 million from 20 customers by touting their success in trading forex. In their solicitations, McClung and FMC, through McClung and others, falsely represented that FMC had approximately $300 million in pool participant funds, which were segregated and in reserve, and used approximately $500 million in FMC proprietary funds to trade forex. However, according to the order, the defendants engaged in little, if any, trading on behalf of pool participants.
Of the funds solicited and received, the defendants, through McClung, misappropriated at least $1,701,250 for personal expenses, including approximately $70,000 to purchase automobiles, and to pay purported profit payments or return principal to customers and payments to unrelated individuals, according to the order.
The CFTC thanks the National Futures Association for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Alison B. Wilson, Heather Johnson, Boaz Green, Gretchen L. Lowe, and Vincent A. McGonagle.