A fraudulent FX trader from Florida has been charged by the U.S. Commodity Futures Trading Commission (CFTC), as it enters an Order which requires David R. Lynch to pay over $470,000 in restitution and a civil monetary penalty. Mr. Lynch was transacting in OTC FX markets and running an unregulated pool account.
The Florida-based trader used various techniques to hide the fraud over a five-year period. The CFTC investigation shows that over 14 people were duped by Lynch.
Details in the official notification state that from about December 2008 through July 4, 2013, Lynch operated a commodity pool and fraudulently solicited at least $348,450 from at least 14 pool participants. Lynch falsely told pool participants that he had earned as much as 7 percent per month trading forex, that they could never lose their principal, and that they could get their funds back at any time. However, Lynch deposited only a portion of his pool participants’ funds in forex trading accounts and the trading he did was unprofitable,
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The scheme has signs of a Madoff-type scam where Lynch used a certain amount of client money to pay ‘profits’ to other clients. The CFTC’s Order also finds that Lynch misappropriated over $126,000 of his pool participants’ funds by using part of those funds to pay his personal expenses, and the remainder to pay false profits or purported returns of capital to some pool participants in the manner of a Ponzi scheme.
Lynch concealed his losses by creating counterfeit trading statements to show unprofitable trading accounts in the green.
The CFTC has been actively addressing financial fraud after the major Ponzi scheme instigated by Bernard Madoff. Apart from a monetary penalty, fraudsters are barred from dealing in regulated products. Lynch will serve a lifetime ban.