CFTC’s Kristin Johnson speaks against surge of FX scams
“I have been raising warning flags about this type of scheme for some time. Time and again, fraudsters have been able to attract credulous investors with dreams of big returns and little risk, guaranteed by the charisma of the perpetrators and nothing more. Couching the investment scheme in forex adds a sheen of exoticism and technical expertise that seems to engender a heightened level of trust among the victims. But at bottom, the schemes are the same as the precious metals and digital asset frauds I highlighted this week: too good to be true.”
The Commodity Futures Trading Commission (CFTC) has taken legal action against Darren Robinson and his company, The QYU Holdings Inc. (QYUHI), alleging fraud, registration violations, and books and records violations in connection with a fraudulent scheme that collected over $7.1 million from customers in the U.S., primarily in the Detroit, Michigan area.
According to the CFTC complaint, the fraudulent scheme operated from approximately January 1, 2017, to the present. Robinson, acting individually and on behalf of QYUHI, solicited individuals to participate in a commodity pool managed by QYUHI, purportedly for trading in commodity interests, including forex pairs and forex futures contracts on a leveraged, margined, or financed basis.
However, instead of investing these funds as promised, Robinson and QYUHI misappropriated them by depositing the money directly into QYUHI’s corporate bank account under Robinson’s control.
Robinson used these misappropriated funds for personal expenses, including luxury cruises, airfare, vehicles, real estate purchases, credit card payments, and daily living expenses. Moreover, approximately $1.2 million of later-investor funds were used to pay earlier-investor “profits” and “redemptions” in a classic Ponzi scheme fashion.
The CFTC’s complaint further alleges that throughout the relevant period, QYUHI acted as a commodity pool operator (CPO) without being registered with the CFTC, as required. Robinson also acted as an associated person (AP) of a CPO without proper registration. Additionally, QYUHI failed to provide required disclosures and reports and did not maintain the necessary books and records, as mandated for a CPO.
In a separate criminal action, the U.S. Attorney’s Office for the Eastern District of Michigan filed a criminal complaint against Darren Robinson, charging him with wire fraud in connection with the same fraudulent scheme.
Not even the first forex investment fraud case brought by the CFTC this week
Commissioner Kristin N. Johnson has raised concerns about the increasing prevalence of forex investment fraud schemes. These schemes lure investors with promises of significant returns and minimal risk, often backed by misleading claims and a veneer of technical expertise. She encourages the public to stay vigilant against such scams and stay informed about potential fraudulent activities in forex markets.
“Indeed, this case is not even the first forex investment fraud case brought by the Commission this week. On September 26, the CFTC charged Patrick Wonsey in the United States District Court for the Middle District of Florida for operating the same kind of scheme. According to the complaint, Wonsey solicited individuals with misrepresentations about his track record of success, his ability to limit the riskiness of the investments, and the frequency at which he would pay investors their trading profits. He was able to collect at least $3.4 million from at least 50 individuals. But as with Robinson and QYU, he used the vast majority to line his pockets. The complaint alleges that Wonsey spent hundreds of thousands on diamonds, apartment leases, boats, and other luxury items. He transferred nearly $2 million to his personal bank accounts, and withdrew nearly $350,000 in cash. Roughly $700,000 was used to pay earlier-in-time investors their “profits,” again in the manner of a Ponzi scheme. What little trading Wonsey did do was disastrous, resulting in a loss of about $300,000.
“I have been raising warning flags about this type of scheme for some time. Time and again, fraudsters have been able to attract credulous investors with dreams of big returns and little risk, guaranteed by the charisma of the perpetrators and nothing more. Couching the investment scheme in forex adds a sheen of exoticism and technical expertise that seems to engender a heightened level of trust among the victims. But at bottom, the schemes are the same as the precious metals and digital asset frauds I highlighted this week: too good to be true. Investors must remain on guard against these frauds, and I strongly encourage the public to stay informed about scams and abuses in forex markets by visiting the CFTC’s investor advisory page.”
