CFTC seeks to impose $2.86m penalty on Forex fraudsters

The United States Commodity Futures Trading Commission (CFTC) is pushing for a default judgment in an action targeting VOS Capital Management, LLC and its principal Dominick Vincent Carducci. The proposed default judgment was filed with the New York Southern District Court on January 23, 2020.

The document, seen by FinanceFeeds, makes it clear that the CFTC seeks that the defendants pay a civil monetary penalty in the amount of $2,861,625, which is equivalent to triple the monetary gain to the defendants from their violations. Further, according to the proposed judgment, Carducci and VOS Capital will have to pay, jointly and severally, restitution in the amount of $953,875.

Under the proposed judgment, Carducci is permanently restrained, enjoined and prohibited from directly or indirectly engaging in conduct in violation of Sections 4b(a)(2)(A)-(C), 4o(1), 2(c)(2)(C)(iii)(I)(cc), and 4k(2) of the Act and Regulations 5.2(b) and 5.3(a)(2)(ii). VOS Capital is permanently restrained, enjoined and prohibited from directly or indirectly engaging in conduct in violation of Sections 4b(a)(2)(A)-(C), 4o(1), 2(c)(2)(C)(iii)(I)(cc), and 4m(1) of the Act and Regulations 5.2(b) and 5.3(a)(2)(i).

Further, the defendants are permanently restrained, enjoined and prohibited from, directly or indirectly:

• Trading on or subject to the rules of any registered entity;
• Entering into any transactions involving “commodity interests” for accounts held in the name of any defendant or for accounts in which any defendant has a direct or indirect interest;
• Having any commodity interests traded on any defendant’s behalf;
• Controlling or directing the trading for or on behalf of any other person or entity, whether by power of attorney or otherwise, in any account involving commodity interests;
• Soliciting, receiving, or accepting any funds from any person for the purpose of purchasing or selling of any commodity interests;
• Applying for registration or claiming exemption from registration with the Commission in any capacity, and engaging in any activity requiring such registration or exemption from registration with the Commission except as provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2019); and
• Acting as a principal, agent, or any other officer or employee of any person registered, exempted from registration, or required to be registered with the Commission except as provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9).

According to the CFTC Complaint, from at least August 2016 through in or about September 2018 (the Relevant Period), the defendants operated a fraudulent scheme in which they solicited, accepted and misappropriated funds for a pooled investment vehicle in off-exchange leveraged or margined Forex contracts.

Carducci, as an officer and agent of VOS Capital, is alleged to have knowingly made fraudulent and material misrepresentations and omissions, in both conversations and written communications, about his FX trading and returns to persuade at least thirty individuals to transfer at least $1.1 million to the defendants for the purpose of participating in a pooled forex investment vehicle.

The CFTC says that VOS Capital and Carducci have engaged, are engaging, or are about to engage in acts and practices in violation of a number of sections of the Commodity Exchange Act, and rules of Commission Regulation, which prohibit fraud in connection with forex transactions and fraud by a commodity pool operator (CPO).

In addition, VOS Capital acted at all times during the Relevant Period as a CPO by operating or soliciting funds for a pooled investment vehicle that is not an eligible contract participant (ECP) and that engages in retail FX transactions, without being registered with the Commission as a CPO, as required by the Act and Regulations. In particular, VOS Capital’s failure to register as a CPO violated Sections 2(c)(2)(C)(iii)(I)(cc) and 4m(1) of the Act, 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc), 6m(1) (2012), and Regulation 5.3(a)(2)(i), 17 C.F.R. § 5.3(a)(2)(i) (2018).

Carducci solicited funds for participation in a pooled investment vehicle for the purpose of trading in off-exchange leveraged or margined forex contracts, while associated with VOS Capital as an officer, employee, or agent, without being registered with the Commission as an associated person (AP) of VOS Capital, as required by the Act and Regulations. Specifically, Defendant Carducci’s failure to register as an AP of a CPO violated Sections 2(c)(2)(C)(iii)(I)(cc) and 4k(2) of the Act, 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc), 6k(2) (2012), and 17 C.F.R. § 5.3(a)(2)(ii).