Douglas Lien ordered to pay over $10.3 million for classic Ponzi scheme
Mr. Lien admitted that from August 2000 until December 2019, he solicited more than $14.2 million from 45 individuals to manage their trading in commodity futures, specifically U.S. Treasury Bond futures.
The U.S. District Court for the District of New Mexico has ordered Douglas Lien to pay more than $10.3 million in monetary sanctions and relief for a futures trading fraud that lasted nearly 20 years.
In a classic Ponzi scheme, Mr. Lien misappropriated client money intended for futures trading and issued false account statements to conceal his fraud.
Besides permanent trading and registration bans from the CFTC, the order requires the restitution of $5,195,679 and a civil penalty of $5,195,679. The CFTC warned victims that they might never see their money again.
Mr. Lien admitted that from August 2000 until December 2019, he solicited more than $14.2 million from 45 individuals to manage their trading in commodity futures, specifically U.S. Treasury Bond futures.
Operating a classic Ponzi scheme, he used client money to pay for the false trading profits he declared and kept more than $3.5 million for so-called “management fees”.
The millions in fake profits documented in inaccurate account statements, including erroneous annual IRS Form 1099s, were taken into account by the court, as well as his failure to register as a futures commission merchant (FCM) to legally solicit and accept money from commodity futures clients for futures trades.
Every now and then, the authorities announce they charged some respected figure of running a Ponzi scheme. In February, David Gentile was arrested for operating a $1.7 billion fraud that lasted for four years, much less than Mr. Lien’s but much more money at stake.
Mr. Gentile’s case involved connections with the Church of Scientology and Russian organized crime, but his Wall Street peers and the media didn’t even suspect despite the growing number of whistleblowers and law firms pointing to the contrary.
“My law firm has been sounding the alarm on this for 18 months. GPB Capital is a classic Ponzi scheme involving nearly $2 billion in funds from thousands of Main Street investors who got roped in by thirsty hustlers. It is disappointing that the financial world essentially gave GPB Capital a pass. After Madoff, there is just no excuse”, said Joseph Peiffer, managing partner of law firm Peiffer Wolf Carr Kane & Conway.
Financial watchdogs across the globe have been warning that scams and frauds are on the rise as the world population goes digital, especially during the pandemic that drove many to invest for the first time.
An FCA top official has recently spoke about the new trend of online scams. “In the context of Gamestop, however, it is relevant, however, to draw attention to the increase in retail trading accounts in the UK during 2020”, said Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA.
“The trend preceded the lockdown but accelerated during the first lockdown, in particular, perhaps fuelled by people spending more time online, more time at home, and the increase in so-called commission-free trading”, he added.
ASIC has also recently of an increasing number of scammers throughout the COVID-19 pandemic. The Australian regulator has registered a 200% growth in reports of financial misconduct over January/February 2021 YoY.
