CFTC fines fraudulent FX Broker

US regulator; Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges that Roy Scarboro, Jr of Archdale, NC,

US regulator;  Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges that Roy Scarboro, Jr of Archdale, NC, fraudulently solicited approximately $713,000 from customers to trade off-exchange foreign currency (forex).

The CFTC order also finds that Scarboro misappropriated funds for his personal use and issued false account statements to conceal that he lost most of the funds trading. Scarboro has never been registered with the CFTC.

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The CFTC order requires Scarboro to pay a $350,000 civil monetary penalty. The order also permanently prohibits Scarboro from trading on a CFTC-registered entity and from registering or seeking exemption from registration with the CFTC.

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According to the CFTC order, beginning in or about June 2009, Scarboro solicited and accepted approximately $713,000 from at least six individuals for the purpose of trading off-exchange leveraged forex through a pool named Capital Asset Management Fund, L.P. (CAMF). Scarboro was CAMF’s General Partner and Manager. In his solicitations, Scarboro represented to at least one participant that only 20 percent of CAMF’s funds would be used to trade forex, with the remainder being invested in U.S. Treasuries. In fact, Scarboro used participants’ funds to trade forex only and never invested in any type of U.S. Treasury instrument, according to the order.

The CFTC order further finds that Scarboro deposited approximately $612,000 in forex trading accounts at registered Futures Commission Merchants. He sustained consistent losses as a result of his trading, with no profitable months, and lost approximately $597,000 of his participants’ funds, according to the order. To conceal his trading losses, the order finds, Scarboro issued false monthly account statements to CAMF’s participants that showed at various times that the participants were either making modest profits or incurring only modest losses. In addition, Scarboro falsely reported to participants on these account statements that he was taking no allocation of the profits for himself as CAMF’s General Partner. The order also finds that Scarboro misappropriated at least $59,000 of participants’ funds.

In a related criminal proceeding, Scarboro was sentenced on May 4, 2011 to 26 months imprisonment and required to pay $682,663.62 in restitution (United States v. Roy E. Scarboro, Case Number 3:10-cr-254 (W.D.N.C.)).

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