Married the wrong person? SEC goes after widow of Forex fraudster
The Securities and Exchange Commission seeks to replace Steve Karroum as a defendant in a Forex fraud suit with his widow.
The United States authorities are known for their strictness when it comes to tackling securities fraud. Another piece of proof has just been provided in a case brought by the Securities and Exchange Commission (SEC) against Steve H. Karroum, his wife – Sahar Karroum, and FX & Beyond Corporation.
Let’s recall that Defendant Steve H. Karroum was the President of FX & Beyond Corporation and controlled FX & Beyond. He had claimed to have created a computerized foreign exchange platform that conducted forex trades without loss. FX & Beyond was incorporated in Virginia but its corporate status was terminated on February 29, 2016, due to failure to pay annual fees and file annual reports.
From December 2007 through May 2014, Mr Karroum solicited approximately $4 million from 18 investors for himself and on behalf of his company to be used for Forex trading. He failed to register the investment offerings with the SEC as required. He also failed to invest the funds in Forex trading. Instead, he deposited the funds in FX & Beyond’s account and misappropriated investor funds for his and his wife’s personal use or benefit. Mr Karroum further misled investors by providing materially false or misleading account statements purporting to show profits from Forex trading.
In February this year, the Magistrate Judge assigned to the case issued a Report and Recommendations as to the SEC’s Motion. In the document, the Judge recommended the entry of default judgement in favor of the Securities and Exchange Commission against the defendants. The SEC is entitled to damages in the total amount of $1,537,290, which comprises disgorgement, prejudgment interest, and a civil monetary penalty. The Magistrate Judge further recommended that Defendants be enjoined from further violating the Securities Act and the Exchange Act.
In that Report, the Judge said Ms Karroum is not alleged to have violated the Securities Act or the Exchange Act but is a part of the suit as a “nominal defendant” from whom the SEC may recover for Defendants’ violations. Ms Karroum received at least $335,000 in transfers from FX & Beyond’s bank account for personal expenses such as mortgage payments.
Shortly afterwards, Ms Karroum has replied to the Court Report by stating that her husband had passed away. She challenged the claims about her receiving a part of the ill-gotten funds from her husband.
The Commission, however, seems to be determined to pursue the case. On Friday, March 2, 2018, the regulator filed a set of documents with the Virginia Eastern District Court. Among them is a Motion to Substitute Party. Via this Motion the Commission requests that Ms Karroum replaces Mr Karroum as a defendant in the case.
In addition, in a separate document, the SEC replies to Ms Karroum’s objections regarding the Magistrate’s report and recommendations. The Commission disagrees with the widow’s allegations that she never received the complaint in this case. The regulator also notes the findings that Ms Karroum indeed benefited from investors’ funds without any legitimate claim to the money.
The SEC asks the Court to grant its motion for substitution and, once this is done, to enter final judgment against all Defendants in this matter.
The case is captioned Securities and Exchange Commission v. Karroum et al (1:17-cv-00187).