Currency cogs

Christopher B Cornett to pay over USD17m in foreign currency fraud action

The US Commodity Futures Trading Commission has obtained a federal court order of default judgment and permanent injunction requiring defendant Christopher B Cornett of Buda, Texas, to pay USD10.16m in restitution and a USD6.78m civil monetary penalty in connection with a foreign currency pooled investment fraud.

The order, entered on 24 August 2012, by Judge Lee Yeakel of the US District Court for the Western District of Texas, also imposes permanent trading and registration bans against Cornett and permanently prohibits him from further violations of federal commodities law, as charged.

The court’s order stems from a CFTC complaint filed on 2 February 2012, charging Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register as a commodity pool operator.

The order finds that from at least June 2008 through at least October 2011, Cornett solicited prospective pool participants to invest in a pooled forex investment and that he acted as the manager and operator of the pool. The pool was referred to at various times as ITLDU, ICM, International Forex Management LLC, and/or IFM LLC, according to the order. In his solicitations, Cornett falsely told prospective pool participants that, while there were weeks when he either lost money or broke even trading forex, he had never experienced a losing month or a losing year trading forex, the order finds.

The order also finds that from 18 June 2008 through September 2010, Cornett solicited approximately USD7.07m from pool participants, participants redeemed approximately USD1.64m, and Cornett lost approximately USD4.17m of the pool’s funds trading forex. During this period, Cornett had only one profitable month trading forex and earned little, if any, fees for acting as the pool’s operator, the order finds. Thus, during this period, Cornett misappropriated approximately USD1.26m of the pool’s funds and for most, if not all of the period, provided participants with false weekly reports/account statements.

The court’s order further finds that from October 2010 through October 2011, Cornett solicited an additional approximately USD6.95m from pool participants. Cornett transferred approximately USD3.37m to forex trading accounts at six foreign brokers and lost approximately USD2.3m at five of the brokers, and likely lost an additional USD905,000 at the sixth broker trading forex with pool funds. As of October 2011, Cornett had misappropriated approximately USD1m of the pool’s funds and less than USD520,000 remained in bank accounts in the names of the pool, according to the order.

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