A New York federal judge has ordered nearly $1.2 million in restitution and a $370,000 civil penalty against a New York-based FX broker and its operator for fraudulently soliciting funds from investors to trade in foreign currency.
According to a suit brought by the Commodity Futures Trading Commission (CFTC), Michael S. Wright and his company, Global FX Club, took over the money from several unsuspecting investors by guaranteeing them a monthly return on their investments, based on profits purportedly earned from forex trading. The CFTC charged the defendants with fraud, misappropriation, and issuing false account statements.
A permanent injunction also bars Mr. Wright and his companies from working for a registered retail foreign exchange dealer in the future or registering themselves.
In a related criminal case, Wright was fined $400,000 and sentenced to 21 months of prison and three years of supervised release. He plead guilty in October 2017 to one count of commodities fraud pursuant to a plea agreement with the court for the Southern District of New York.
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Many of the victims sought higher monthly income on their retirement savings, but the CFTC alleges that the fund never traded or generated any income from trading forex, misappropriating most of the investors’ funds.
Fiscal Penalties and Trading Ban
The CFTC alleges that beginning in August 2010 and continuing through 2017, the defendants, including Wright as controlling person of WTCG, conspired to defraud investors by enticing them to participate in their fund. As a result, at least ten pool participants gave the defendants a total of $400,000 to trade in their purported forex pool.
To create the illusion of stability, the defendants allegedly prepared and distributed false account statements to fund participants, telling investors that the fund offered a safe investment with steady and guaranteed returns, according to the complaint.
The CFTC has asked the court to provide full restitution to defrauded pool participants, disgorgement of ill-gotten gains and to pay the appropriate civil monetary penalties. In addition to fiscal claims, the agency obtained permanent registration and trading bans and a permanent injunction from future violations of federal commodities laws.