The US Commodity Futures Trading Commission (CFTC) has filed a complaint in the US District Court for the Northern District of Texas, against GID Group, Inc. (GID), a Texas corporation, and its agents and officers, brothers Rodney and Roger. The defendants, both of Grand Prairie, Texas, have been charged with operating a fraudulent off-exchange foreign currency (forex) ‘Ponzi” scheme in which they solicited and accepted approximately USD5.5 million.
On 8 November, 2011, the Honourable Barbara M G Lynn of the US District Court of the Northern District of Texas, entered a restraining order freezing the defendants’ assets and prohibiting the destruction of all books and records.
The CFTC complaint alleges that from at least February 2010 through at least November 2010, GID and the Wagner brothers fraudulently solicited at least USD5.5 million from at least 99 people for the purpose of participating in a pooled investment vehicle trading in off-exchange agreements, contracts or transactions in forex on a leveraged or margined basis. The complaint, however, alleges that during the relevant period only a small portion of GID customer funds were deposited into forex trading accounts held in the name of the Wagner brothers and that these accounts sustained net losses.
The complaint further alleges that the Wagner brothers provided actual and prospective GID customers with payout schedules that falsely promised returns of at least 200 percent and made explicit statements during face-to-face meetings that they had been successfully trading forex for two to three years and earning 6 percent per day. The complaint alleges that to conceal and perpetuate the fraud, the Wagner brothers made weekly payouts of “returns” knowing that in fact GID had obtained no profits through forex trading.
In the continuing litigation against the defendants, the CFTC is seeking preliminary and permanent injunctive relief, the return of funds to defrauded customers, the repayment of ill-gotten gains, permanent trading and registration bans, and civil monetary penalties for each violation of the Commodity Exchange Act.
The CFTC acknowledges the assistance of the Texas State Securities Board, the Financial Services Authority, and the US Attorney’s Office for the Northern District of Texas.