U.S. District Court Issues Orders Against Four “Operation Wooden Nickel” Defendants for their Roles in Defrauding Investors and Banks in Illegal Foreign Currency Schemes
Vito Napoletano and Boris Shuster, of New York, and Patrick Sweeney and Joseph Torre, of New Jersey, ordered to pay more than $7.6 million in restitution and penalties.
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that U.S. District Court Judge George Daniels of the Southern District of New York entered four separate orders against Vito Napoletano of Staten Island, N.Y., Boris Shuster of Brooklyn, N.Y., Patrick Sweeney of Freehold, N.J., and Joseph Torre of Old Bridge, N.J. The orders stem from the cooperative law enforcement investigation code-named “Operation Wooden Nickel,” an undercover law enforcement sting conducted by the CFTC, the Federal Bureau of Investigation (FBI), the Department of Justice and the Securities and Exchange Commission.
Napoletano, Shuster, Sweeney, Torre and others were sued by the CFTC on November 18, 2003, in six civil injunctive actions for engaging in fraud in the sale and solicitation of illegal foreign currency (forex) futures contracts (see CFTC Press Release 4867-03, November 19, 2003). Including today’s announcement, Judge Daniels has entered several orders imposing more than $26 million in restitution and more than $19 million in civil monetary penalties against 36 Wooden Nickel defendants (see CFTC Press Releases 5265-06, 5315-07, 5490-08 and 5557-08).
In the current orders, Judge Daniels ordered Napoletano, Shuster, Sweeney and Torre to pay more than $7 million in restitution to defrauded victims and $600,000 in civil monetary penalties. The court also permanently banned the four defendants from trading on markets subject to the CFTC’s jurisdiction and from registering with the CFTC due to their roles in defrauding investors and banks in the illegal forex schemes.
The order against Napoletano finds that he fraudulently solicited funds from investors, misappropriated their funds and made false reports to investors regarding the profitability of their accounts. The order also finds that Napoletano filed false reports with the National Futures Association regarding the balances and locations of customers’ funds. The court ordered Napoletano to pay defrauded investors $5,129,687 in restitution and a $360,000 civil monetary penalty.
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The order against Shuster finds that he fraudulently solicited customers of the New York forex firm Walter, Scott, Lev & Associates, LLC, made fraudulent misrepresentations as to the trading of customers’ funds, issued false customer account statements showing profits and misrepresented to customers that catastrophic trading losses had wiped out their funds. The court ordered Shuster to pay $1.5 million in restitution and a $120,000 civil monetary penalty.
The court order against Sweeney finds that he participated in defrauding and deceiving banks by engaging in illegal forex transactions to convert bank funds and to conceal this conversion of funds from the banks. The court ordered Sweeney to pay $424,001 in restitution to the defrauded banks and a $120,000 civil monetary penalty.
In the order against Torre, the court finds that Torre knowingly aided and abetted a scheme in which he helped divert forex profits to co-conspirators and then received a cash kickback for arranging the transactions.
The CFTC thanks the FBI, the U.S. Attorney’s Office for the Southern District of New York and the National Futures Association for their assistance.
The following CFTC staff members are responsible for this case: Sheila Marhamati, Joseph Rosenberg, Philip Rix, Steven Ringer, Lenel Hickson, Vincent McGonagle and Stephen J. Obie.