beware of foreign currency trading fraud

Beware of Foreign Currency Trading Fraud

Aug 31, 2020

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 […]

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unit investment trust

What is a Unit Investment Trust Switch?

Jun 1, 2020

Recently, the Financial Industry Regulatory Authority (“FINRA”) announced that it ordered Stifel, Nicolaus & Company, Incorporated

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Protection of Vulnerable Investors

Proposed Law Aims to Protect Elderly and Vulnerable Investors

Feb 24, 2020

Last week, the Florida House of Representatives unanimously approved an amendment to the securities laws to be titled the and Act for the Protection of Vulnerable Investors. The proposed law is designed to protect vulnerable investors, including persons who are more than 65 years old, but younger persons are included as well. Under the proposed bill, a vulnerable adult is a person 18 years of age or older whose ability to perform the normal activities of daily living or to provide for his or her own care or protection is impaired due to a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, or brain damage, or the infirmities of aging.  This provision is similar to other “hold and report” laws which have recently been adopted by many other states. These laws protect brokerage firms from being sued for freezing accounts and notifying a trusted contact and authorities where they have a reasonable belief of “financial exploitation” of a vulnerable investor by another. The proposed legislation applies where money or securities are taken out of an account or trades are made in the brokerage account of a vulnerable investor. The Florida House of Representatives unanimously approved the legislation, and it is widely believed that the bill will pass the Florida Senate. The proposed legislation currently is pending before the Rules Committee of the Florida Senate and must receive approval from that committee before it goes to the full Florida Senate for a vote.   Under the proposed Protection of Vulnerable Investors law, a securities dealer or investment adviser may place a hold of up to 15 business days on a transaction or distribution if it reasonably believes that financial exploitation of a vulnerable adult has occurred or been attempted, or is occurring or will be attempted. The proposed legislation permits a brokerage firm to extend the hold for up to 10 additional business days if the firm’s review of the underlying conduct continues to support the hold. The identical bills pending in the Florida House of Representatives and Florida Senate require the firm, within three business days, to report the initial hold to the Florida Office of Financial Regulation (OFR), as well as all persons authorized to transact business in, and any designated trusted contact for, the vulnerable investor’s account. The firm also must notify OFR of any extension of the original hold.    FINRA Also Has Rules to Protect Elderly or Vulnerable Investors The brokerage industry’s own regulators have put similar safeguards into place to protect elders or mentally incapacitated customers from financial exploitation. The Financial Industry Regulatory Authority (FINRA) allows broker-dealers to put a hold of up to 15 days on the disbursement of funds from seniors’ accounts if they believe that an individual is being financially exploited. Another recent attempt to prevent elder abuse is “trust contact” forms. Firms are now required to ask their retail clients to provide the name and trusted contact and provide information for a person who can be contacted in the event of suspected financial exploitation.  The 2018 Senior Safe Act protects brokers and their firms from liability when reporting possible exploitation to […]

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