Michael J. Riolo of Boca Raton, Florida, has been charged with fraud by the U.S. Commodity Futures Trading Commission (CFTC) in connection with an off-exchange foreign currency (forex) scam. The charges, filed on May 21, 2009, in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division, allege Riolo and two companies he controls – LaSalle International Clearing Corporation and Sterling Wentworth Currency Group, Inc. – fraudulently solicited funds from the public and provided customers with false account statements.
According to the CFTC complaint, from at least June 18, 2008, Riolo failed to disclose crucial information to customers. This included the fact that he acted as the counterparty in all forex transactions, owed millions to customers, and lacked the funds to cover those debts or potential profits. The complaint further alleges that monthly account statements sent to customers were misleading, showing inflated account values without revealing the defendants’ inability to actually pay those amounts.
Specifically, the CFTC alleges the defendants overstated available cash, in some instances by as much as $24.5 million. Stephen J. Obie, CFTC Acting Director of Enforcement, stated the agency is dedicating significant resources to prosecuting Ponzi schemers and deterring future criminal activity. The CFTC noted this case was one of 23 Ponzi scheme cases filed in 2009 alone.
The CFTC is seeking a preliminary injunction to freeze the defendants’ assets, along with restitution, disgorgement of ill-gotten gains, civil monetary penalties, the appointment of a temporary receiver, and a permanent injunction. The agency also received assistance in the matter from the Federal Bureau of Investigation, the United States Attorney’s Office for the Southern District of Florida, and the State of Florida Office of Financial Regulation.
The case is being handled by CFTC staff members Joseph Rosenberg, Steven Ringer, Philip Rix, Lenel Hickson, and Vincent McGonagle, with support from William Tylinski and visiting Investigator Yeongil Park from the Korean Financial Supervisory Service.
Source: CFTC.gov
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