The American Federal Bureau of Investigation (FBI) has revealed on Friday that Stafford Maxwell, the former owner of Millennium Capital Exchange, Inc., has been arraigned on charges of allegedly “orchestrating a multi-million-dollar foreign exchange market Ponzi scheme.” The U.S state of Georgia-resident was indicted March 17, 2015, on ten counts of wire fraud.
According to Acting United States Attorney John Horn, in March 2007, Maxwell incorporated and owned Millennium Capital Exchange, Inc., as an FX trading firm. From about 2008 to January 2012, Maxwell solicited investments with promises of high fixed rates of return to be generated from successful trading. Maxwell falsely stated that he possessed excellent forex trading skills and that he had a long history of forex trading success.
“Maxwell allegedly lured investors to his forex firm with false promises of trading success,” said Horn. “Even with an improving economy, investment fraud schemes are as popular as ever, and citizens need to be careful when choosing where to entrust their hard earned money.”
According to documents presented to the court, Maxwell often assured investors that they would earn an annualized rate of return on their investments from approximately 48% to 72%! (An obvious warning sign to anyone with minimal understanding of trading or basic math.)
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The trading strategy Maxwell claimed to use was to place “stops” and “floors” on trades to insure that the gains would be large, but that the losses would be small. He additionally claimed that past investors had realized significant gains based on his trading and that he had reserve funds that enabled him to cover any possible trading losses.
According to the indictment however, Maxwell had little success executing forex trades and lost almost all the money that he traded on. He was also unable to pay investors the promised investment dividends as he possessed no reserve fund to cover trading losses.
Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office, stated: “The investigation that led to the indictment and arrest of Maxwell reflects the FBI’s commitment to the many victims that have suffered significant financial losses and hardships as a result of this fraudulent investment scheme as alleged in the indictment. Investors are reminded to be cautious of investment pitches that promise exceptionally high rates of return such as those allegedly promised in this case.”
According to Millennium’s business model, Maxwell was supposed to use the invested funds to trade through accounts at an unnamed financial firm in Geneva, Switzerland. Based on his false representations, investors wired Maxwell well over $1 million, expecting that the funds would be traded in the Swiss accounts the indictment alleges.
After receiving money from investors, however, Maxwell diverted approximately half of the money for other improper purposes. First, in an effort to perpetuate the scheme and make it appear that he was a successful forex trader, Maxwell used the money received from new investors to pay “dividends” to older investors- the very definition of a Ponzi scheme. Second, Maxwell used the money received from investors to pay his own personal living expenses. In the end, Maxwell spent or lost almost every dollar invested with him.