Ponzi scheme

Patrick Cole and Global Strategic Marketing fined USD2.2m over forex Ponzi scheme

Patrick Cole and his company, Global Strategic Marketing (GSM), are to pay over USD2.2m in a CFTC enforcement action over a multi-million dollar off-exchange foreign currency (forex) Ponzi scheme.

A court order, issued 26 February 2014, imposes disgorgement of USD1,146,399 and also requires Cole and GSM to pay civil monetary penalties of USD1,146,399.
 
The order further imposes permanent trading and registration bans on Cole and GSM, and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.
 
Specifically, the court’s order finds that in marketing a fraudulent forex investment programme offered by another defendant, Complete Developments LLC (CDL), GSM recklessly made repeated false statements including claims about low risk of loss; guaranteed return of principal; high rates of return on investment; and purported experience of CDL’s forex trading team. The order further finds that GSM made the false statements based on information from CDL principal, defendant Kevin Harris, and that GSM did not independently verify the accuracy of that information. The order also finds that GSM made false statements about its own conduct, including telling potential investors that GSM had done its “homework” regarding CDL, when in fact GSM had not verified the accuracy of its representations to potential investors.
 
The order finds that GSM’s misrepresentations to potential investors were false, misleading, and material and that GSM’s conduct, including not conducting adequate due diligence about GSM and ignoring investor complaints, establishes that GSM acted with reckless disregard as to whether its statements to potential investors were true. The order also finds that Cole is liable for GSM’s violations because he controlled GSM and “had actual knowledge of all of GSM’s activities at all levels with respect to CDL, and was the decision-maker regarding GSM’s activities upon which the primary violation of the Act is based.”
 
In May 2013, the court entered a Judgment requiring defendants CDL, its principals and controlling persons Kevin Harris, Keelan Harris, and Karen Starr, and defendant Investment International, to pay over USD23m in civil monetary penalties and restitution in connection with this fraudulent forex Ponzi scheme.

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