The US Commodity Futures Trading Commission has charged foreign currency firm Barki, of Mint Hill, North Carolina, and the late Bruce C.
The US Commodity Futures Trading Commission has charged foreign currency firm Barki, of Mint Hill, North Carolina, and the late Bruce C. Kramer with fraudulently soliciting at least USD40m to trade leveraged foreign currency contracts.
Kramer and his firm are alleged to have misappropriated at least USD30m of customer funds to pay purported profits, return principal to customers, and for personal expenses. The defendants concealed their fraud and trading losses through false account statements for over five years.
Judge Graham C. Mullen of the US District Court for the Western District of North Carolina has entered an order freezing the assets of defendants and relief defendants, appointing a receiver, and granting other relief, in order to marshal all assets and funds and achieve a fair and equitable distribution of assets to the defrauded customers.
The defendants’ fraud became known to customers on or around 25 February 2009, when Kramer, who lived in Midland, North Carolina, committed suicide.
The CFTC’s civil complaint also names his wife Rhonda Kramer and Forest Glenn, a horse farm owned by the Kramers, as relief defendants. The CFTC seeks repayment of all funds or assets they received as a result of defendants’ fraudulent conduct to which they have no legitimate entitlement.
‘Given the circumstances, the CFTC’s primary goal with this action is to ensure any existing assets are protected from further dissipation and fairly returned to customers,’ says CFTC acting director of enforcement Stephen J. Obie.
According to the CFTC complaint, since at least June 2004 through February 2009, Barki and Kramer solicited at least USD40m from at least 79 individuals or entities for the purported purpose of trading forex. Defendants claimed success in trading forex, promised little risk using Kramer’s trading system, and lured customers with promises of monthly returns of at least three to four per cent.
The complaint alleges that, in reality, the defendants sustained trading losses of at least USD10m trading margined or leveraged forex, and otherwise ran a Ponzi scheme by using approximately USD20m of customers’ funds to make payments to customers.
They spent the remaining funds on personal expenses, including the purchase of a horse farm for more than USD1m, a Maserati sports car and other luxury cars, artwork, and extravagant parties.
The defendants issued false monthly and annual statements to customers showing purported profits earned from their trading and reflecting that defendants were taking a fee of at least 20 per cent based on those purported profits, the complaint alleges.
Following recent media coverage about Ponzi schemes and in response to customer questions regarding their investments, the defendants created fictitious trading records showing that the trading account held approximately USD59m. In fact, the accounts held USD1m or less. Today, only USD575,000 remains in trading accounts and the complete disposition of customer funds is unknown.
In its continuing litigation, the CFTC is seeking preliminary and permanent injunctions, return of funds to defrauded customers, disgorgement of ill-gotten gains, and civil monetary penalties.
