Eshaq Nawabi ordered to pay $9 million after Forex Ponzi scheme
To conceal their misappropriation, Nawabi created and issued false account statements that misrepresented trading returns the pool participants supposedly earned. When clients wanted their money back, Nawabi wouldn’t return them their funds.
The Commodity Futures Trading Commission is finishing up its case against Eshaq M. Nawabi and his entities, Nawabi Enterprise and Hyperion Consulting Inc.
A consent order in the U.S. District Court for the Eastern District of California will impose restitution and a civil monetary penalty, requiring Nawabi to pay $4.5 million in restitution to victims of the fraud and a $4.5 million civil monetary penalty.
“Profits of 8–25% per month on their funds with minimal risk”
Ordered to pay a total sum of $9 million, Eshaq Nawabi was found to have solicited pool participants to deposit money to supposedly trade forex. Akin to a Ponzi scheme, pool participants’ money was misappropriated for Nawabi’s benefit as well as to pay other pool participants, the CFTC said.
According to the regulator, Nawabi’s approach to sales was also built on lies. To persuade pool participants to send them money, he made fraudulent and material misrepresentations and omissions including: the defendants had historically made large profits (between 8–25% per month) for themselves and pool participants from trading forex; pool participants would realize profits of 8–25% per month on their funds with minimal risk; the defendants would trade forex with the funds the pool participants deposited; and upon request, pool participants could withdraw their money within three to five business days of any such requests.
To conceal their misappropriation, Nawabi created and issued false account statements that misrepresented trading returns the pool participants supposedly earned. When clients wanted their money back, Nawabi wouldn’t return them their funds.
Despite the hefty sum Nawabi is ordered to pay, it is undisclosed if he can fulfill that order. The CFTC cautioned that orders requiring repayment of funds to victims may not always result in the recovery of lost money because the wrongdoers may not have sufficient funds or assets.
Earlier this year, a CFTC enforcement case resulted in Erik J. Hass and his entity, Simply Gains, Inc., to pay a $830,000 civil penalty after a Forex fraud operation worth at least $2.1 million.
Despite assurances that depositors could not lose more than 20% of the funds they deposited, the defendants lost over $1 million trading forex and misappropriated at least $415,000 more to spend on Hass’s mortgage, credit card debt, and a Caribbean cruise.
In December 2023, the CFTC achieved significant victories in two major retail forex fraud cases, resulting in substantial judgments and penalties against the perpetrators, Michael DaCorta and Avinash Singh.
Michael DaCorta, associated with Oasis International Group, Limited, Oasis Management, LLC, and Satellite Holdings Company, was found guilty of defrauding around 800 individuals of over $80 million. The court ordered DaCorta to pay more than $61 million in restitution and civil monetary penalties. The scheme involved soliciting funds under false pretenses for forex trading, but instead, the money was used for personal luxuries.
Avinash Singh and his company Highrise Advantage, LLC were ordered by the court to pay over $102 million in restitution and penalties. Singh’s scheme involved fraudulent solicitation of almost $58 million from investors, of which less than $2.5 million was used for intended forex trading. The majority of the funds were misappropriated or used for Ponzi-type payments, leading to significant financial harm to investors.
