The US Commodity Futures Trading Commission has charged Dennis Todd Hagemann and Yellowstone Partners, both of Raleigh, North Carolina, with operating a Ponzi scheme involving the fraudulent solicitation of at least USD700,000 from at least nine individuals to trade foreign currency futures managed accounts and/or a pooled investment.
The defendants also allegedly attempted to solicit funds from at least one other individual.
On 10 March 2010, Chief Judge Louise Flanagan of the US District Court for the Eastern District of North Carolina entered an emergency order freezing the defendants’ assets and prohibiting the destruction of books and records. The order also requires the defendants to account for assets.
The CFTC’s enforcement action, filed under seal on 9 March 2010, charges that from at least September 2009 to the present, the defendants fraudulently solicited and received at least USD700,000 from retail forex customers. In at least two instances, Hagemann solicited USD50,000 through meetings held at restaurants, according to the complaint.
The complaint charges that Hagemann falsely claimed experience and success in trading forex and lured customers with false promises of quick and large profits, including that Yellowstone Partners was returning 100 to 300 per cent to customers “every couple of months.”
He also created the impression of being a well established forex trader by falsely representing that 1) he had USD500m of investments under his control at all times, 2) his forex trading system made money even when markets dropped and 3) his Russian contacts could help his investments, according to the complaint.
Hagemann also claimed to be registered with the National Futures Association and to have employees registered with the NFA when, in fact, he is not registered with the NFA and does not have any employees registered with the NFA in any capacity.
According to the complaint, only USD200,000 of the approximately USD700,000 solicited from customers was deposited into forex trading accounts, and the defendants lost nearly all of that money trading forex.
By November 2009, as alleged, Hagemann stopped trading the Yellowstone accounts and misappropriated the remaining USD500,000 in customer funds for personal use or to make purported profit payments or return customers’ principal in a manner similar to a Ponzi scheme.
Hagemann was arrested on 10 March by North Carolina authorities.
