Houston, TX – Willie L. Cloud, Jr. was found guilty of operating a $585,000 Ponzi scheme targeting at least 37 individuals, according to a federal court order entered on March 24, 2011. Judge Gray H. Miller of the U.S. District Court for the Southern District of Texas issued a default judgment against Cloud and his company, C & R Financial, Inc., on March 24, 2011.
The Commodity Futures Trading Commission (CFTC) initially filed a complaint against Cloud and C & R Financial on March 4, 2010, alleging violations of the Commodity Exchange Act’s anti-fraud provisions. The court order mandates Cloud to pay $280,170.66 in restitution to defrauded investors and a hefty $5,070,000 civil monetary penalty.
From January 2008 to January 2010, Cloud and his company lured investors with promises of substantial returns through off-exchange foreign currency (forex) trading. However, the investigation revealed that while some customer funds were used for trading, the majority – approximately $98,000 – was lost. Roughly $85,000 was then transferred into Cloud’s personal bank account.
The CFTC found that Cloud misappropriated at least $280,000 of investor funds for personal expenses, including child support, anger management sessions, meals, a 1971 Oldsmobile, and approximately $148,000 in cash withdrawals. The scheme operated by paying earlier investors with funds obtained from new investors, a classic hallmark of a Ponzi scheme.
To mask the losses and misappropriation, Cloud provided investors with falsified account statements, falsely reporting returns ranging from eight to 259 percent over five to six-month periods.
In addition to the CFTC’s action, the Harris County, Texas District Attorney’s Office indicted Cloud on March 26, 2010, with Misapplication of Fiduciary Property, a felony. Cloud subsequently pled guilty on March 17, 2011, and is scheduled to be sentenced on April 20, 2011. The CFTC acknowledged the assistance of the Harris County District Attorney’s Office in the case.
The court permanently banned Cloud from engaging in any commodity-related activity, including trading, and from registering with the CFTC.
Source: CFTC.gov
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