Victor Yu of San Jose, California, and his company, VFRS, LLC, are facing charges of fraud following a civil enforcement action filed by the U.S. Commodity Futures Trading Commission (CFTC) on July 26, 2012. A federal judge issued an emergency order on July 27, 2012, freezing the assets of Yu and VFRS, and prohibiting the destruction of financial records.
The CFTC alleges that Yu and VFRS defrauded at least 100 clients in connection with off-exchange foreign currency (forex) trading. Yu is also charged with failing to register with the CFTC as a commodity trading advisor (CTA). The alleged scheme, which ran from at least August 2009 to July 2012, involved soliciting investments in forex accounts and ultimately resulted in losses exceeding $2 million for clients, while Yu and VFRS collected over $270,000 in fees.
According to the complaint, Yu misrepresented the safety and profitability of trading software he claimed to have developed. He allegedly told clients the software was “extremely safe,” prevented losses, and guaranteed winning trades, even claiming it had successfully predicted currency market activity back to the 1920s. Yu and VFRS reportedly solicited clients through word-of-mouth, holding meetings in clients’ homes and offering referral fees for bringing in new investors.
Clients signed agreements to pay a 30 percent service fee on any net profits and were given login information to access the defendants’ trading software. The CFTC argues that this activity constitutes acting as a CTA, requiring registration with the agency, which Yu allegedly failed to do.
The CFTC is seeking civil monetary penalties, restitution for the defrauded clients, trading and registration bans, and both preliminary and permanent injunctions to prevent further violations of federal commodities laws. A hearing on the CFTC’s motion for a preliminary injunction is scheduled for August 10, 2012, in the U.S. District Court for the Northern District of California.
Source: CFTC.gov
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