SEC requests Virginia Court to issue default judgement against FX & Beyond Corporation
On top of monetary penalties, the SEC is also seeking that the defendants be permanently enjoined from future violations.
The United States Securities and Exchange Commission (SEC) has requested that the Virginia Eastern District Court issues a default judgement against Steve H. Karroum and his company FX & Beyond Corporation.
On Wednesday, October 18th, the Commission submitted the relevant motions with the Court.
Mr Karroum and FX & Beyond Corporation are charged with securities fraud. In 2012, 2013, and 2014, the Defendants solicited approximately $1.4 million from at least 10 United States investors. The Defendants promised these investors that money they gave to FX & Beyond or to Mr Karroum directly would be used for Forex trading. However, the defendants never used any part of that money for FX trading. Instead, they used the money for their own purposes, including making Ponzi-like payments to earlier investors, paying unrelated business expenses, and misappropriating funds for Mr. Karroum’s and his wife’s personal use or benefit.
On February 16, 2017, the SEC sued the Defendants in connection with their misconduct. The Commission also sued Mr Karroum’s wife, Sahar Karroum, as a relief defendant because a part of the proceeds of the fraud was used for her personal benefit when she had no legitimate claim to that money.
Neither of the Defendants nor Ms Karroum ever answered the Commission’s complaint. Now, the Commission requests entry of a default judgment as to both Defendants and Ms Karroum.
The Court is seen to have personal jurisdiction over the Defendants because of their extensive contacts not just with the United States, but also with the Eastern District of Virginia. The Defendants’ conduct constituting securities law violations occurred in this district, at all relevant times the Karroums resided in this district, and FX & Beyond had its principal place of business here.
The Commission notes that instead of admitting the wrongfulness of their misdeeds, the Defendants continued to solicit new investments even after an investor sued them for fraud and they learned that the SEC was investigating their conduct. Mr Karroum has fled the country and has not returned for over two years. That is why, the SEC seeks that the defendants are permanently enjoined from future violations.
The Commission is also seeking monetary penalties. It has calculated the Defendants’ disgorgement as the sum of all new investments Defendants received between April 2012 and May 2014, less the sum of all payments Defendants made to those investors during that same period. During that time, ten investors (or families who invested collectively) invested $1,417,890.14 with the Defendants. Those investors (or families) got back only $611,930.00. Hence, the Commission seeks $805,960.14 in disgorgement.
The Commission also urges the Court to impose a third-tier penalty on each Defendant. Based on the number of violations and the number of investors to whom illegal conduct was directed, the resulting penalties would be $1.5 million for Mr Karroum and $7.25 million for FX & Beyond.
The case is captioned Securities and Exchange Commission v. Karroum et al (1:17-cv-00187).