Despite a recent guilty plea and consequent verdict from a Texas state court last week, a receiver for a convicted forex trader Kevin G. White has announced a lawsuit against the accounting firm Weaver & Tidwell LLP along with a trader at Forex Capital Markets LLC, citing gross oversight of fraud and a failure to prevent losses to investors.
The appointed receiver of the case is Kelly Crawford, serving on behalf of private investment firm KGW Capital Management LLC, accused Weaver & Tidwell and Forex Capital of providing the recently convicted Kevin G. White with aid that helped him conduct and carry out numerous violations last June. White previously operated Revelation Forex Fund LP, a fund that captured nearly $7.4 million in investments – citing the court order, he pled guilty in December to numerous charges of fraud, including mail fraud and the embezzlement of approximately $1.8 million in client funds. Compounding this issue, White also pled guilty to accusations of losing upwards of $4 million of client funds, an operation that Crawford felt ultimately should have been noticed and prevented.
Weaver Firm in Crosshairs for Failure to Detect ‘Blatant’ Red Flags
The suit details accusations against the Weaver firm that stated it was acutely aware of the conduct of White and used apathy and “reckless disregard for the truth”, even assisting him in carrying out the fraudulent charges – if convicted, the firm faces severe penalties for this conduct.
According to Mitch Little of Scheef & Stone LLP in a recent statement, “We’re suing the gatekeepers for ignoring various red flags.” As restitution for the crime, approximately $4 million of Revelation Forex’s assets were recently liquidated and redistributed to clients on the heels of a Federal investigation that abruptly closed the account last year and suspended trading activity to prevent any further misconduct. However, Crawford refused to settle with just a de-facto payment for crimes committed, reasoning that, “Weaver and Forex Capital contributed to creating a fake track record for Revelation that lured investors into thinking it was a legitimate fund.”
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False Credentials Tolerated?
Details surrounding the source of the allegations were subsequently revealed, targeting Forex Capital trader Brian Hinman. The suit claims that he illegally posed as a trader at Revelation to fabricate a trading history for the firm using his personal account. Furthermore, Crawford claims that the Weaver firm knowingly signed off and backed the claims of Hinman’s falsified credentials and failed to report the true findings of the fraudulent fund to the authorities. The suit states that, “The Weaver report was used to create the illusion of a three-year track record for a fund that had no trading history and did not even exist.”
The report incorrectly tabbed KGW Capital Management LLC as “one of the world’s leading private investment firms,” despite having only one unqualified individual on the payroll. According to Forex Magnates’ research, the company’s filing statement is confirmed to boast the same on numerous sites, including WallStreetOasis.com.
Despite a number of measures that should have been taken, the suit ultimately claims that the Weaver firm was not simply hoodwinked in this regard, citing a lack of proper background check on White, which easily would have revealed previous violations and sanctions that prevented him from being employed in the securities industry. The pointed nature of the accusations collectively paints a picture of criminal negligence that seeks damages of at least $3.89 million.