Washington, D.C. – Susan G. Davis of Jersey City, New Jersey, and Woodstock, Georgia resident David E. Howard II, along with Joseph Burgos of Rutherford, New Jersey, have been charged with defrauding at least 73 customers out of $1.3 million through a foreign currency (forex) trading scheme, according to a complaint filed by the U.S. Commodity Futures Trading Commission (CFTC) on July 27, 2011.
The CFTC alleges that Davis, Howard, Burgos, and their respective companies – Forex Capital Trading Group, Inc., Forex Capital Trading Partners, Inc., and Highland Stone Capital Management, LLC – fraudulently solicited funds from customers to trade off-exchange forex contracts. None of the defendants were registered with the CFTC at the time of the alleged offenses, except for Davis, who had recently registered as an Associated Person with a different firm in May 2011.
Judge Richard J. Holwell of the U.S. District Court for the Southern District of New York issued an emergency order on the same day the complaint was filed, freezing the defendants’ assets and preventing the destruction of relevant records. A preliminary injunction hearing is scheduled for August 11, 2011.
The complaint details that, starting in April 2009, the defendants falsely advertised significant profits on their company websites and in other promotional materials. Despite customer accounts managed by Forex Group and Forex Partners losing a combined $224,824 in 2009, the companies reported a 149.35 percent return. Further losses totaling $736,241 were allegedly concealed in 2010, while the defendants claimed gains of 51.94 percent. They also allegedly provided fabricated account statements to potential clients, falsely showcasing profitable results from previous managed accounts.
The defendants are accused of falsely representing Burgos as a successful forex trader and assuring customers their funds would be carefully managed to minimize risk. However, customers ultimately lost over 86 percent of their invested principal, with losses occurring in 78 percent of the months the defendants actively traded their accounts between May 2009 and October 2010.
The CFTC is seeking restitution for defrauded customers, contract rescission, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions to prevent further violations of federal commodities laws. The CFTC also acknowledged assistance from the U.K. Financial Services Authority in this matter.
Source: CFTC.gov
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