This one was pretty much below the radar although One World Capital was probably the biggest US forex brokerage that turned out to be a scam. NFA’s capital requirements which gradually rose from almost nothing to $20+ million since 2008 have caused many forex brokerages to go out of business, consolidate or move their operations completely overseas. Pre-capital requirements era American market was flooded with many small brokerages including One World Capital. Just like many others One World Capital was shut down but apparently under-capitalization was just one of the reasons.
On March 2010 One World Capital Group and its principals were sanctioned by the CFTC for failing to meet minimum adjusted net capital requirements or maintain current books and records, using misleading promotional material, and failing to adopt and enforce written procedures to supervise the use of promotional material. This seemed rather ‘innocent’ when comparing it to what was uncovered later.
On September 2011 CFTC also filed (and simultaneously settled) charges against McGladrey & Pullen, LLP (McGladrey), a nationwide public accounting firm with offices in Chicago, Ill., and a McGladrey partner, David Shane, a certified public accountant (CPA) licensed in Illinois, for failing to properly audit and supervise One World Capital. This too seemed ‘innocent’ enough.
This week two principals of One World Capital were sentenced to 17 years and 12½ years in federal prison, respectively, after pleading guilty to fraud charges for operating a Ponzi-type scheme that diverted millions of dollars to themselves to finance lavish lifestyles and that caused more than 1,000 victim investors worldwide to lose nearly $17 million.
Charles G. Martin, 46, formerly of Glencoe, Ill., and Malibu, Calif., was sentenced today to 204 months, while John E. Walsh, 63, of Lake Forest, Ill., was sentenced yesterday to 150 months in prison. A mandatory restitution of $16,976,554, jointly and severally, was also ordered against both defendants. The government has so far recovered just $1 million from the liquidated proceeds of the defendants’ seized assets.
The Participants in Forex Trading and their Role in the MarketGo to article >>
The principals marketed forex trading services in which they were to serve as the customers’ counterparty. In reality, however, One World’s trading platform operated as a front to placate customers whose margin funds were being systematically misappropriated by them. They concealed the misappropriation from customers, as well as government and industry regulators, by making false representations.
The defendants used customer funds they misappropriated to finance extravagant lifestyles.
Credit card and bank records show that Martin spent more than $1 million at a strip club and restaurants, nearly $1 million at elite hotels and another $1 million renting flight time on private jets.
He purchased a fleet of luxury vehicles, donated hundreds of thousands of dollars to celebrity charity events, and hired personal security guards to accompany him in public.
Similarly, Walsh used his One World credit card to charge personal expenses, including more than $140,000 of jewelry. He also used $70,000 in One World funds for country club expenses and $1,425,000 to purchase a second home in Lake Forest.