A New York federal judge imposed a hefty fine on EJS Capital Management (EJS), Alex Vladimir Ekdeshman and Edward J. Servider who purportedly owned a fraudulent forex scheme for allegedly collecting money from several investors and spending it on a lavish lifestyle.
In a related criminal action and a nearly identical scheme, Ekdeshman was sentenced last year to 87 months of imprisonment and ordered to pay restitution to the victims of his fraud commodity pool Paramount Management LLC. He admitted to soliciting $1.5 million from 100 investors for currency trades and using the money for personal and business expenses.
Specifically, the U.S. District Court for the Southern District of New York has announced the imposition of a $11.6 million penalty on EJS, Ekdeshman, and Servider after they pleaded guilty to forex fraud that sought over $2 million from approximately 112 investors. While claiming the funds would be used for foreign currency trading, even issuing fake account statements to customers, the defendants instead took most of the money for themselves, the CFTC said on Monday.
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In connection with the promotion of their pool, the defendants made a series of materially false claims to lure investors interested in forex trading. The claim was made that pool participants could get extraordinary investment returns.
The CFTC also obtained judgements against a relief defendant, Michael Vilner, to seize the $550,000 he received from EJS Capital Management. Vilner claimed the money was part of a business transaction for foreign exchange software he gave to EJS, but the CFTC said Vilner has failed to provide any documentation of a contract between him and the company.
“It defies common sense that defendants would have paid $1 million for a software trading program when they never traded forex and instead misappropriated customer funds,” the agency said.
The allegations against EJS and Paramount highlight regulators’ concerns about the risks posed by forex and commodity trading systems sold on the internet, including the potential to undermine market integrity. According to the watchdog, it has seen an increase in websites that fraudulently promote commodity trading systems and advisory services.
In addition to the fiscal penalties, including full restitution to defrauded investors, the commission has imposed permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws.