US Regulator Charges Two Fraudsters for Running an FX Ponzi Scheme

Two North Carolina residents have been charged by the US financial watchdog for running a FX Ponzi scheme which duped customers with false and misleading information. The US regulator, the Commodity Futures Trading Commission (CFTC), has reported that it filed an enforcement action in the U.S. District Court, Eastern District of North Carolina, charging Ron Earl McCullough and David Christopher Mayhew with fraudulently soliciting 11 individuals to trade in the FX markets.

During a three-year period McCullough and Mayhew were running a Ponzi scheme which fraudulently solicited $2.3 million. The CFTC filed a complaint against the two fraudsters for a range of activities, the details of the complaint state that the two had; misrepresented the risks of trading Forex ; falsely guaranteed the return of customers’ principal; falsely promised high returns, including double returns in short periods of time; and failed to disclose that they intended to use customer funds to pay principal and purported profits to other customers and for personal expenses.

Another Ponzi Scheme

Like many sham investment schemes, McCullough and Mayhew were using client funds to pay 'other' clients as they circulated money in a bid to hide their fraud. Ponzi schemes aren't uncommon in the world’s largest economy. The CFTC has been waging a war against the practise which was highlighted in the Madoff case of 2008, it saw the former NASDAQ chairman, Bernard Madoff, guilty of running a multi-billion dollar scam. The US regulators have been stepping up their game in the way they deal with margin FX trading since the new Dodd-Frank rulings were deployed.

In August 2008 the CFTC embraced a new division that was dedicated to monitoring the FX markets. In the press release issued at the time the CFTC commented about the number of cases it had dealt with since the turn of the century (2000), it stated: “Since enactment of the Commodity Futures Modernization Act in 2000, the CFTC has filed nearly 100 enforcement actions against firms and individuals selling illegal forex futures and option contracts. To date, the CFTC has obtained judgments in these enforcement actions for civil monetary penalties of approximately $560 million and restitution of investor losses totaling $450 million.”

In the latest act of fraud, the CFTC also mentions details of Travis Maurice Cox's case, as it is a separate but related matter. The CFTC issued an administrative Order against Cox that sets forth Cox’s fraudulent conduct in connection with his solicitations on behalf of his Forex Trading partners, he had misled five investors and solicited $1.3 million from them. Cox is believed to have previously held SEC registration, number 5609583, which was made dormant in 2011.

Details from the Order state that Cox is required to make restitution of $1,306,010.95 to his defrauded customers and to pay a $330,000 civil monetary penalty. In addition, Cox is permanently banned from dealing in regulated activities under the CFTC.

The case against McCullough and Mayhew continues, the notification states that: “In its continuing litigation against McCullough and Mayhew, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged.”

The CFTC takes FX fraud seriously and has dedicated help guides on its website for individual investors. The information covers techniques used by fraudsters to the verification tactics investors can use to vet a scheme.