Virginia Court holds hearing on SEC action against FX & Beyond Corporation
Magistrate Judge Ivan D. Davis took under advisement the motion for default judgement filed by the Securities and Exchange Commission.
A followup to FinanceFeeds’ earlier article about the United States Securities and Exchange Commission (SEC) having requested that the Virginia Eastern District Court issues a default judgement against Steve H. Karroum and his company FX & Beyond Corporation…
On Friday, November 3, 2017, a hearing was held before Magistrate Judge Ivan D. Davis. The Judge did not rule immediately on the motion filed by the SEC. The minutes from the hearing say that a report and a recommendation are to follow and that the matter is uncontested. SEC’s Motion for default judgment was taken under advisement.
Mr Karroum and FX & Beyond Corporation are charged with securities fraud. According to the SEC, in 2012, 2013, and 2014, the Defendants solicited approximately $1.4 million from at least 10 US 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 SEC’s complaint.
Mr Karroum has fled the US and has not returned for more than two years. That is why, the SEC requests 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. As a result, the Commission asks for $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.