Last week, the Commodity Futures Trading Commission (“CFTC”) announced charges against individuals in a foreign currency Ponzi scheme targeting African immigrants. The alleged perpetrators Dennis Jali, Arley Ray Johnson, and John Frimpong were charged with participating in a 28 million Ponzi scheme by fraudulently soliciting funds from investors for the “1st Million Pool” through and on behalf of 1st Million LLC, Smart Partners LLC, and Access to Assets LLC. The CFTC complaint alleges that the defendants fraudulently solicited participants to trade in foreign currency (Forex) and digital assets such as bitcoin through pooled trading accounts controlled by Jali.
According to the CFTC, the defendants allegedly targeted members of church communities by portraying the 1st Million Pool as a means to obtain financial freedom and support charitable religious causes. As alleged, from 2017 to 2020, over 1000 participants contributed at least $28 million to the 1st Million Pool, often through entering “secure contracts” that falsely promised investors’ funds would be held in trust or escrow, used to trade Forex and bitcoin, and then returned in their entirety at the end of the pool participation term. The complaint alleges that the defendants misappropriated at least $7 million of 1st Million Pool funds and used it to pay for expensive cars, personal travel, and living and business expenses.
The SEC also brought charges against Jali, Frimpong, and Johnson, who both directly and through their companies 1st Million LLC and The Smart Partners LLC, are alleged to have falsely told investors that their funds would be used by a team of skilled and licensed traders for Forex and cryptocurrency trading, promising risk-free returns of between 6% and 42%. The SEC’s complaint alleges that the defendants often targeted vulnerable African immigrants and exploited their common ancestry and religious affiliations.
The SEC charges that Jali used investor funds to pay for, among other things, two luxury cars, private jet charters, airfare and hotels, extravagant retail purchases (including purchases at Gucci, Tory Burch, and Burberry), and a down payment for a house in Atlanta. Jali’s personal expenses were totally unrelated to cryptocurrency and Forex trading, and were contrary to the explicit statements to investors.
Beware of Foreign Currency Trading Frauds
Foreign currency trading fraud or Forex related scams are not new. In fact, the CFTC warns investors to be cautious when it comes to forex trading as follows:
The advertisements seem too good to pass up. They tout high returns coupled with low risks from investments in foreign currency (forex) contracts. Sometimes they even offer lucrative employment opportunities in forex trading.
Do these deals sound too good to be true? Unfortunately, they are, and investors need to be on guard against these scams. They may look like a new sophisticated form of investment opportunity, but in reality, they are the same old trap—financial fraud in fancy garb.
Forex trading can be legitimate for governments and large institutional investors concerned about fluctuations in international exchange rates, and it can even be appropriate for some individual investors. But the average investor should be wary when it comes to forex offers.
The CFTC and the North American Securities Administrators Association (NASAA) warn that off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud.
What are forex contracts?
Forex contracts involve the right to buy or sell a certain amount of a foreign currency at a fixed price in U.S. dollars. Profits or losses accrue as the exchange rate of that currency fluctuates on the open market. It is extremely rare that individual traders actually see foreign currency. Instead, they typically close out their buy or sell commitments and calculate net gains or losses based on price changes in that currency relative to the dollar over time.
Forex markets are among the most active markets in the world in terms of dollar volume. The participants include large banks, multinational corporations, governments, and speculators. Individual traders comprise a very small part of this market. Because of the volatility in the price of foreign currency, losses can accrue very rapidly, wiping out an investor’s down payment in short order.
How do the scams work?
Forex scams attract customers with sophisticated-sounding offers placed in newspaper advertisements, radio promotions, or on Internet sites. Promoters often lure investors with the concept of leverage: the right to “control” a large amount of foreign currency with an initial payment representing only a fraction of the total cost. Coupled with predictions about supposedly inevitable increases in currency prices, these contracts are said to offer huge returns over a short time, with little or no downside risk.
In a typical case, investors may be assured of reaping tens of thousands of dollars in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted—stolen— for the personal benefit of the con artists.
The bottom line is, be wary of individuals who want you to invest in foreign currency to make a quick or guaranteed return.
YOU MAY HAVE THE RIGHT TO RECOVER YOUR FOREX LOSSES
CONTACT US TODAY FOR A FREE CONSULTATION
If you or a loved one have suffered investment losses as a result of Forex trading, or any other type of investment fraud or broker negligence, contact the offices of Investment Fraud lawyer Melanie Cherdack for a free consultation. Because she has been in the trenches as a former Wall Street attorney, Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment scam. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk. Former Wall Street securities attorney Melanie S. Cherdack and her team of lawyers represent individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499 or 305-349-2336.