California court issues fines of $4 mln in Denari forex scam
A California federal judge fined Denari Capital, along with its owners Travis Capson and Arnab Sarkar, more than $4 million for operating a pooled foreign exchange investment firm, the Commodity Futures Trading Commission (CFTC) said Monday.
The default judgement order follows a CFTC complaint filed in 2019 against Denari Capital and the two men behind it over claims that they fraudulently raised $8.3 million from at least 28 victims.
The settlement involves charges that, from August 2012 to December 2019, the defendants solicited participants to invest with Denari, misrepresenting the past profitability of its forex trading.
Capson and Sarkarare were also charged with acting as commodity trading advisors and associated persons without obtaining the required registrations. Furthermore, the defendants didn’t provide the required disclosures concerning client testimonials on the Denari website, nor the hypothetical disclaimer required by CFTC regulations.
Trying to scam the NFA
Denari and its proprietors have also been charged by the CFTC with making false statements to the National Futures Association (NFA) when submitting annual CTA registration updates. The findings state that throughout their involvement with Denari, Capson and Sarkar told NFA representatives that the company had been trading forex with proprietary funds since 2015, and that it did not trade forex for third parties until 2019.
In a statement, the US derivatives regulator outlined other alleged breaches committed by the men, including misrepresentations about how much Denari had previously earned. In addition to the false representations, the commission contends that the duo personally claimed they experience for several years in actual trading and investing in futures when in fact they were not.
Furthermore, the CFTC said the defendants did not know whether participants who put up their money in the pool were qualified or not. Instead, they told their clients that the company was exempt from registering because the participants were all qualified, which the jury found was untrue.
District Court Judge ordered Capson and Sarkar to pay more than $360,000 in restitution and other damages. In addition, they and their company are required to pay restitution of $3.6 million to victims of their scheme. The order also imposes permanent trading and registration bans.
“The order appoints Kathy Bazoian Phelps as Permanent Receiver for Denari, to collect and distribute restitution. Phelps has collected and distributed more than $700,000 of funds and more than $2.5 million of securities to satisfy allowed participant claims. However, the CFTC continues to caution victims that restitution orders may not always result in the recovery of money lost, because wrongdoers may not have sufficient funds or assets,” the regulator concludes.