The CFTC has announced that Forex Capital Trading Group, Forex Capital Trading Partners, and Highland Stone Capital Management were charged by a US District Court for running a fraudulent forex scheme and ordered to pay $1.8 million. The defendants were accused of misleading clients with claims of previous trading results when they had in fact lost money as well as stating falsely that they were registered with the CFTC. In addition to the monetary punishments, the defendants were permanently banned from the commodities industry.
Federal Court in New York Orders Defendants Forex Capital Trading Group, Forex Capital Trading Partners, and Highland Stone Capital Management to Pay over $1.8 Million for Fraud in Off-Exchange Foreign Currency Scheme
Court order permanently bars defendants from the commodities industry
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered a default judgment and permanent injunction order against defendants Forex Capital Trading Group, Inc. (Forex Group), Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J. The order requires these defendants to pay a civil monetary penalty of $1,352,293 and to disgorge $450,764 of ill-gotten gains for the benefit of defrauded customers. The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The order stems from a CFTC anti-fraud enforcement action filed on July 27, 2011 against these three companies and their principals (see CFTC Press Release 6083-11, July 28, 2011). The order finds that Forex Group, Forex Partners, and Highland Stone fraudulently solicited 106 customers who invested more than $2.8 million to trade retail foreign currency (forex). In soliciting customers, the defendants falsely claimed, on their websites and elsewhere, that their forex trading for customers was profitable for a period of several years, the order finds. The defendants’ claims included a falsely reported customer gain of 51.94 percent in 2010, a year, in fact, in which their customers lost more than $1.2 million. Overall, customers lost more than 93 percent of their total invested principal through the defendants’ forex trading, the order finds.
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The order also finds that the defendants distributed false account statements to prospective customers showing profitable trading and acted in capacities requiring registration with the CFTC, but were not registered.
The CFTC’s litigation is continuing against the principals of Forex Partners and Forex Group, namely Susan G. Davis of Jersey City, N.J., and David E. Howard II, of New York, N.Y., and against the principal of Highland Stone, Joseph Burgos, of Rutherford, N.J.
The CFTC appreciates the assistance of the U.K. Financial Services Authority in this matter.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.