Fraud under the magnifying glass

CFTC charges Douglas Elsworth Wilson and three California companies over Forex scheme

A federal court in California has entered an order freezing the assets of defendants Douglas Elsworth Wilson of Poway, California, and three California companies that he controls and manages, Elsworth Berg Capital Management LLC (EBCM), Elsworth Berg Inc, and Elsworth Berg FX LLC (collectively, Elsworth Berg). The order also prohibits the destruction of their books and records.

The order arises out of a CFTC civil complaint filed on July 27, 2011 in the US District Court for the Southern District of California. The complaint alleges that the defendants solicited at least USD4.4 million from over 60 customers to trade commodity futures contracts and foreign currency (forex). The defendants allegedly misappropriated customer funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme.

In connection with their fraud, defendants allegedly misrepresented to customers and prospective customers that regardless of Elsworth Berg’s commodity futures or forex trading results, the return of customers’ investment principal was guaranteed at the end of a five-year period through use of a purportedly innovative “Collateral Reserve” structure, which owned life insurance policies on third-parties.

Wilson and EBCM also allegedly issued false statements to some customers that overstated the value of their investments. Wilson and EBCM misappropriated approximately USD72,000 in customer funds and used the money for purposes other than trading, according to the complaint.

In its continuing litigation against the defendants, the CFTC seeks restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of federal commodities law.

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