Ponzi-Like Forex Scheme Ends in $3.4M Fine for New York City Man

A federal court in New York concluded a seven-year legal fight by ordering Daniel Winston LaMarco to pay more than $3.4 million for running a Ponzi-style foreign exchange scheme.

According to the CFTC report, the ruling imposed heavy financial penalties on the New York City resident and permanently barred him from any future commodity-related activities.

Final Judgment and Permanent Ban

The U.S. District Court for the Eastern District of New York ordered LaMarco to pay $862,600 in restitution to victims and a $2,587,800 civil penalty. Judge Diane Gujarati’s order also permanently banned him from the commodities industry and prohibited future violations of the Commodity Exchange Act.

The case began in July 2017 when the Commodity Futures Trading Commission (CFTC) filed a complaint accusing LaMarco and his company, GDLogix, Inc., of misleading investors and misusing their funds. Earlier rulings found him liable for both forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term and commodity pool operator fraud.

How the Scheme Worked

Court findings reportedly showed LaMarco raised nearly $1.5 million from friends and acquaintances, claiming he would trade forex contracts through a commodity pool.

He lost most of the money through personal trading and redirected more than $630,000 as fake “profits” to some participants, operating in the manner of a Ponzi scheme.

Magistrate Judge James M. Wicks’ report concluded LaMarco misappropriated funds, lied to investors, and conducted no trading on their behalf. GDLogix faced a parallel default judgment with identical penalties and lifetime bans.

Related: CFTC Files for Certificates of Default Against LaMarco and GDLogix

In 2020, the CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term filed for certificates of default against LaMarco and GDLogix, stating that both defendants had continually failed to answer or otherwise respond to the agency’s complaint, despite being granted numerous extensions to submit their responses.

Criminal Conviction and Prison Time

The civil case followed a criminal prosecution in which LaMarco pleaded guilty in 2017 to commodities fraud and wire fraud. He was sentenced to 42 months in prison and ordered to pay $872,600 in restitution.

The CFTC cautioned that victims might not recover funds if the defendant lacked assets. The agency said it would continue to pursue enforcement actions to protect investors.