Till SEC do us part: Widow of President of FX & Beyond Corp disputes claims of ill-gotten funds
Ms Karroum insists that SEC showed no evidence that she and her husband communicated about business matters.
Marital matters have infused a fraud case brought by the United States Securities and Exchange Commission (SEC) against FX & Beyond Corporation, its President Steve H. Karroum, and his wife Sahar Karroum.
According to the SEC’s Complaint, from at least 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, however, 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.
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 the defendants’ violations. Ms Karroum has allegedly received at least $335,000 in transfers from FX & Beyond’s bank account.
As FinanceFeeds has reported, on February 2, 2018, the Magistrate Judge assigned to the case issued a Report and Recommendations as to the SEC’s Motion. In the document, the Judge recommends the entry of default judgement in favor of the Securities and Exchange Commission against Steve H. Karroum, Sahar Karroum, and FX & Beyond Corporation. 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 latest Court filings, however, show that Ms Karroum has replied to the Court Report challenging the claims about her receiving a part of the ill-gotten funds from her husband.
Ms Karroum informs the Court of her husband’s death. Since the claims concerning the widow hinge upon Mr Karroum’s liability, Ms Karroum objects to any final judgment for disgorgement before a final judgment of liability can be properly entered against her husband.
In addition, the widow argues that she never received the SEC’s Complaint in this case. According to Ms Karroum, service through her husband’s email address or on Mr. Forest, her husband’s bankruptcy attorney, does not comport with due process.
“The SEC did not put forth any evidence that the Karroums regularly communicated with each other about these matters, so service on Ms. Karroum through her husband’s email and on her husband’s bankruptcy counsel does not comport with the due process requirements”, the documents filed by Ms Karroum with the Court say.
In its Report and Recommendation, the Magistrate Judge found that the Court could order equitable relief against Ms Karroum because her husband transferred investors’ funds to pay her credit card bills and to make mortgage payments on four apartments that the Karroums jointly own. In particular, the Magistrate found that Ms Karroum should be ordered to disgorge $132,431. Ms Karroum challenges these numbers based on claims that she does not have ownership interest in the apartments and she did not benefit from the mortgage payments in question. She also challenges the data about the ownership of the credit cards.
In conclusion, Sahar Karroum asks that the court reject the Magistrate’s findings and recommendations as to her.
The case, captioned Securities and Exchange Commission v. Karroum et al (1:17-cv-00187), continues at the Virginia Eastern District Court.