Fort Lauderdale, FL – September 5, 2007 – A pair of federal court orders finalized cases brought by the Commodity Futures Trading Commission (CFTC) against multiple individuals and companies involved in fraudulent off-exchange foreign currency (forex) options schemes. The cases, heard before Judge Cecelia M. Altonaga in the Southern District of Florida, revealed a pattern of deceptive solicitation and significant financial losses for customers.
The CFTC initially filed complaints in 2005 alleging boiler-room operations were used to fraudulently solicit forex trading. Investigations revealed that Chadwick, Grayson Bauer & Co., Inc. (Chadwick), based in Fort Lauderdale, and its successor entity, Madison Forex International, LLC (Madison), misrepresented the potential for profit while downplaying the risks associated with forex trading between June 2003 and August 2004. Approximately 64 Chadwick customer accounts lost a collective $960,000, with only one account showing a profit.
The scheme continued under Madison Forex, opening at least 240 accounts, the vast majority of which resulted in losses for customers. Qualified Leverage Providers, Inc. (QLP), a futures commission merchant in Aventura, Florida, was found liable as a principal for Madison’s fraudulent actions. Approximately 98% of Madison’s customer accounts sustained overall trading losses.
Judge Altonaga’s orders, issued July 13th and 16th, found John D’Onofrio, of Fort Lauderdale, president of Chadwick and owner of Madison, and Gary Baugh, of Pompano Beach, vice president of Chadwick and managing partner of Madison, liable for the fraud. The court determined they controlled the firms and knowingly induced the violations. Christopher Peck, of Boca Raton, and Lea Lauren, of Delray Beach, both salespersons at Chadwick and Madison, were also found directly liable for making fraudulent misrepresentations.
In a separate case, default judgments were entered against five introducing brokers associated with World Market Advisors, Inc. (WMA), which operated out of Fort Lauderdale and a series of short-lived affiliates from at least October 2002 to June 2005.
The combined orders imposed restitution totaling over $4.5 million and civil monetary penalties totaling nearly $5.5 million against Chadwick, Madison, QLP, D’Onofrio, Baugh, Peck, and Lauren. The CFTC’s enforcement action aims to protect investors and ensure the integrity of the forex market.
Source: CFTC.gov
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