CFTC settles action over forex scheme against Douglas Elsworth Wilson
A federal court in California has entered a consent order that requires defendants Douglas Elsworth Wilson of Poway, California, and three companies he controls and manages, Elsworth Berg Capital Management (EBCM), Elsworth Berg Inc, and Elsworth Berg FX jointly and severally to pay USD3,965,670.71 in restitution to customers as well as a USD1.5m civil monetary penalty.
The order also imposes permanent trading and registration bans and permanent injunctions against further violations of federal commodities law, as alleged.
The order follows a US Commodity Futures Trading Commission civil complaint filed on 27 July 2011 in the US District Court for the Southern District of California. The order finds that the defendants solicited over USD4.4m from over 60 customers to trade commodity futures contracts and foreign currency. According to the order, the defendants misappropriated customer funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme.
Specifically, the order finds that defendants 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.
The order further finds that Wilson and EBCM 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 order.
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