$33m fine for US forex fraudster
A probe into the biggest retail foreign exchange scam in US history wrapped up on Thursday with a $33m fine for a man who solicited millions of dollars from unsuspecting investors to fund purchases of 22 luxury cars, eight homes and extravagant entertainment.
Total fines in the three-year long case, which has involved three other co-defendants, previous injunctions and civil penalties, have totalled $150m.
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The case highlights the proliferation of fraudulent foreign exchange schemes involving trading of currencies outside the interbank market and involving products offered to ordinary investors.
The retail forex market is largely unregulated but Commodity Futures Trading Commission, the US futures regulator, has the power to pursue alleged fraud since products frequently involve types of currency futures contracts.
However fraudsters have been able to escape CFTC action by designing their contracts in ways that make them fall outside many court-defined definitions of a futures contract.
In the latest scam, Oregon native Russell Cline was found guilty by a US district court in the state of fraudulently soliciting $40m from individuals.
Gregory Mocek, the CFTC's director of enforcement, said the case had involved "a massive financial fraud".
"In light of our success in prosecuting retail forex scams over the last four years, we are hopeful that all of those involved in the illegal activity will see that their deceptive business models are becoming less attractive," he said.
Forex scams account for about 28 per cent of the CFTC's case load.
According to a court order, Mr Cline and his company Orion International, orchestrated a scheme starting in 1998 in which he "fraudulently solicited customers to purchase illegal off-exchange forex options and futures contracts by misrepresenting the profits and risks involved in forex trading".
Mr Cline misappropriated much of the customers' funds to pay for personal expenses, including eight homes in the Portland area, 22 luxury cars and two boats, as well as entertainment.
The funds were also used to pay others who participated in the scheme to defraud Orion's customers.
As part of the scheme, Cline provided customers with false account statements and directed the posting of false information on Orion's website regarding trading profits, market conditions and opportunities, the balances in individual investor's accounts, and the reasons for delays in paying customers' withdrawals.
Mr Cline has been in jail since May, after pleading guilty in 2004 to charges of mail fraud and money laundering to a federal grand jury in Portland. He is serving an eight year sentence, and was ordered to pay restitution of $16m.
Total fines in the three-year long case, which has involved three other co-defendants, previous injunctions and civil penalties, have totalled $150m.
Story continues below ↓ advertisement
The case highlights the proliferation of fraudulent foreign exchange schemes involving trading of currencies outside the interbank market and involving products offered to ordinary investors.
The retail forex market is largely unregulated but Commodity Futures Trading Commission, the US futures regulator, has the power to pursue alleged fraud since products frequently involve types of currency futures contracts.
However fraudsters have been able to escape CFTC action by designing their contracts in ways that make them fall outside many court-defined definitions of a futures contract.
In the latest scam, Oregon native Russell Cline was found guilty by a US district court in the state of fraudulently soliciting $40m from individuals.
Gregory Mocek, the CFTC's director of enforcement, said the case had involved "a massive financial fraud".
"In light of our success in prosecuting retail forex scams over the last four years, we are hopeful that all of those involved in the illegal activity will see that their deceptive business models are becoming less attractive," he said.
Forex scams account for about 28 per cent of the CFTC's case load.
According to a court order, Mr Cline and his company Orion International, orchestrated a scheme starting in 1998 in which he "fraudulently solicited customers to purchase illegal off-exchange forex options and futures contracts by misrepresenting the profits and risks involved in forex trading".
Mr Cline misappropriated much of the customers' funds to pay for personal expenses, including eight homes in the Portland area, 22 luxury cars and two boats, as well as entertainment.
The funds were also used to pay others who participated in the scheme to defraud Orion's customers.
As part of the scheme, Cline provided customers with false account statements and directed the posting of false information on Orion's website regarding trading profits, market conditions and opportunities, the balances in individual investor's accounts, and the reasons for delays in paying customers' withdrawals.
Mr Cline has been in jail since May, after pleading guilty in 2004 to charges of mail fraud and money laundering to a federal grand jury in Portland. He is serving an eight year sentence, and was ordered to pay restitution of $16m.
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