The US Commodity Futures Trading Commission has obtained an emergency court order freezing assets held by defendants M25 Investments, M37 Investments, Scott P. Kear, Sr. and Jeffrey L. Lyon, all of Waxahachie, Texas, and David G. Seaman, of Arlington, Texas.
The court’s order also prohibits the destruction of records and appoints a receiver to identify assets, customers and amounts owed customers.
The court’s order stems from a CFTC anti-fraud enforcement action filed on 29 September 2009, in the US District Court in Dallas, charging the defendants with fraudulently soliciting at least USD8m from approximately 224 customers in connection with the trading of foreign currency, forex options and commodity futures contracts.
The defendants ran their alleged scheme out of their offices in Texas, West Virginia and Mississippi. Many of the defendants’ customers were elderly and knew each other through churches in West Virginia, Mississippi, Texas, Maryland and other states, according to the CFTC complaint.
The CFTC complaint further alleges that defendants fraudulently guaranteed monthly returns of two per cent and annual returns of 24 per cent and falsely claimed to be successful forex traders. Defendants did not disclose to prospective and existing customers that a significant portion of their funds would not be used for trading. The defendants also did not disclose that as of at least 31 March 2009 they did not have sufficient assets to pay the promised monthly profits or return principal.
The complaint also alleges that the defendants overall lost funds trading forex, forex options and commodity futures and subsequently concealed their trading losses, lack of trading and other uses of customer funds by sending monthly statements to their customers that falsely assured customers that they were earning two per cent every month.
The CFTC also charges M25 and the individual defendants with registration violations in connection with the operation of a pool for purposes of trading on-exchange commodity futures contracts without being properly registered with the CFTC.
