Canadian Watchdog: FX Trading Scheme Guaranteeing Returns Breaches the Law

An Ontario Securities Commission (OSC) panel found that an FX trading scheme, Rare Investments, has violated the Canadian securities law and has been operating in “contrary to the public interest,” according to an announcement from June 30. The case involved unregistered trading and illegal distribution of securities that occurred between January 1, 2009 and March 31, 2010.

Since the start of 2009, Rare Investments and its directors, Ramadhar Dookhie and Evgueni Todorov, have been soliciting investors based on the promise that they had developed a way to trade FX with guaranteed success, a common trait of scams in this field.

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After Rare raised approximately $1.15 million from fifteen investors and issued promissory notes that carried a monthly interest rate of between 1% and 3%, allegations rose that they  lost the money in Forex trading and used the funds to repay previous debts unrelated to the company, and thereby engaged in fraudulent conduct in breach of the securities law which led to the OSC investigation.

The OSC panel ruled on June 27, 2014, that the promissory notes amounted to securities that were issued without a prospectus or an authorization, and that the accused had traded without registration. This amounted to several securities law violations.

According to the decision, “Investors were led to believe that the respondents developed a leveraged forex trading strategy that could produce an attractive potential return on investment, and that half of their investment would be secured in guaranteed investment certificates (GICs).” However, the ruling indicates that almost $700,000 was lost in trading, several hundred thousand dollars were paid to the directors and others, and only $275,000 was put into GICs.

The hearing to determine sanctions and costs in the case will be held at the offices of the Commission in Toronto, on August 28, 2014.