Court freezes assets of currency trading firm in fraudulent solicitation case

Court freezes assets of currency trading firm in fraudulent solicitation case

The US Commodity Futures Trading Commission has obtained a federal court order in Rochester, New York, freezing the assets of Atwood & James, Ltd. and Atwood & James, S.A., Inc.

It has also frozen the assets of Michael A. Kardonick, who maintains multiple residents in Brooklyn, New York, Pembrook Pines, Florida, and Rio de Janeiro, and Gary R. Shapoff, of Pittsford, New York.

The order, issued by the Honorable Charles J. Siragusa of the US District Court for the Western District of New York, also prohibits the destruction of documents and appoints a receiver to marshal assets.

The court's order arises out of the CFTC's complaint charging defendants with fraudulently soliciting more than USD1m from retail clients to trade foreign currency options and charging Atwood and Kardonick with misappropriating client funds.

'This forex fraud, which infiltrated the globe as an international enterprise, should remind all investors to exercise prudence and restraint when presented with opportunities to profit with little to no risk. The CFTC reminds investors to conduct their own research and avoid being duped. The bottom line always is: if it sounds too good to be true, it usually is,' says CFTC acting director of enforcement Stephen J. Obie.

Specifically, the complaint alleges that from at least 2001 to the present, defendants fraudulently solicited funds from members of the general public worldwide, including the US and the UK, to trade forex options.

The defendants allegedly made extraordinary and false claims regarding Atwood including that: Atwood clients will never lose their principal and that profits are virtually guaranteed; Atwood is a sophisticated worldwide company with offices in New York, Amsterdam, London and Rio de Janeiro; Atwood's traders are licensed and regulated in the US with their main corporate offices located in Rochester, New York; and Atwood and Kardonick have been successfully trading foreign currency options for the past 30 years.

As alleged, Atwood and Kardonick are not successful traders. According to the complaint, the only known trading accounts are Kardonick's personal trading accounts, which from 2003 through September 2008 sustained net losses of approximately USD1.7m trading commodity futures and options.

According to the complaint, the defendants do not operate out of Rochester, New York; rather, they operate out of Rio de Janeiro, Brazil. Moreover, the defendants are not registered or licensed with any known financial regulatory authority.

Kardonick and Shapoff also failed to disclose that they both have criminal convictions for mail and wire fraud and Shapoff, additionally, was the subject of two CFTC reparations actions involving misrepresentation, misuse of customer funds, nondisclosure, and order executions.

In its continuing litigation, the CFTC seeks a permanent injunction against each defendant prohibiting them from further violating the CEA, restitution to defrauded customers, repayment of all ill-gotten gains from the defendants, and the imposition of monetary penalties.

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