The US Commodity Futures Trading Commission has charged CapitalStreet Financial and Sean F.
The US Commodity Futures Trading Commission has charged CapitalStreet Financial and Sean F. Mescall, both of Charlotte, North Carolina, with operating a Ponzi scheme involving the fraudulent solicitation of at least USD1.3m from at least 69 customers in connection with foreign currency trading.
Defendants are also charged with misappropriating approximately USD875,000 of customer funds.
On 9 September 2009, the same day the complaint was filed, the Honorable Robert J. Conrad, Jr. of the US District Court for the Western District of North Carolina, Charlotte division, entered an order freezing the defendants’ and relief defendants’ assets, protecting books and records and scheduling a preliminary injunction hearing in the matter on 16 September 2009.
Specifically, the CFTC complaint charges that, since at least September 2006 through the present, defendants fraudulently operated a forex trading scheme, luring customers to trade managed or pooled forex accounts by claiming forex trading success and promising quick and large returns, such as 60 per cent to 80 per cent annually.
Defendants created the false impression that CSF was a well-established forex firm, in operation since 1999 with more than 35 offices in New York and North Carolina. In reality, defendants were not successful forex traders, sustained about USD275,000 in trading losses, and opened CSF in or around August 2006 with four offices in the Charlotte area. Defendants provided customers with false monthly statements to conceal trading losses and their misuse of customer funds.
Defendants allegedly used the misappropriated customer funds to pay purported profits to customers as in a Ponzi scheme and for their personal use, including the living expenses of Mescall and relief defendant Gerald Mescall, a relative of Sean Mescall. Defendants provided customers with false monthly statements to conceal trading losses and misuse of customer funds. Defendants also directed funds to relief defendant Gaincapital, a company owed by Mescall.
Neither relief defendant provided any legitimate services or has a legitimate entitlement to any CSF customer funds.
In a related action, the securities division of the Office of the North Carolina Secretary of State arrested Sean Mescall and executed search warrants at CSF and his home.
Relief defendant Gaincapital is not related to Gain Capital Group, a futures commission merchant that is registered with the CFTC.
