Digital Assets Report


Like this article?

Sign up to our free newsletter

CFTC freezes assets over USD35m forex Ponzi scheme

Related Topics

The Commodity Futures Trading Commission (CFTC) has obtained a federal court order freezing the assets held by defendants Keith F Simmons of West Jefferson, NC, Bryan Coats of Clayton, NC, Jonathan Davey of Newark, Ohio, and numerous corporate entities controlled by them.

The order also prohibits the destruction of books and records and schedules a hearing on the CFTC’s motion for a preliminary injunction for February 23, 2011. Previously, on January 19, 2011, the court issued a consent order freezing the assets of defendants Deanna Salazar and Life Plus Group, LLC and relief defendant Lawrence Salazar.

The order stems from a CFTC complaint, filed on January 13, 2011, in the US District Court for the Western District of North Carolina, charging the defendants with fraudulent solicitation and misappropriation of customer funds in connection with a Ponzi scheme involving foreign currency exchange (forex) trading. The following corporate entities also are charged in the CFTC complaint: Black Diamond Capital Solutions, LLC, Black Diamond Holdings, LLC, Life Plus Group, LLC, Genesis Wealth Management, LLC, Divine Circulation Services, LLC, Safe Harbor Ventures, Inc., Safe Harbor Wealth Investments, Inc., Divine Stewardship, LLC, and Safe Harbor Wealth, Inc.

The CFTC complaint alleges that, from at least April 2007, the defendants orchestrated a USD35 million Ponzi-style fraudulent scheme, soliciting the funds from at least 240 individuals to invest in off-exchange forex through a purported Black Diamond trading platform. In their solicitations, the defendants allegedly fraudulently represented that Black Diamond had a three-year history of highly successful forex trading and consistently earned positive returns averaging more than four percent monthly, the Black Diamond trading was based on an advisory system created by qualified platform developers, the risks of trading forex through Black Diamond were limited and sufficient funds were available to be returned to customers upon request. However, no forex trading was ever conducted through the Black Diamond trading platform, and the Black Diamond trading platform never existed, according to the complaint.

The individual defendants also allegedly misappropriated millions of dollars of customer funds to make purported profit payments to customers, as is typical of a Ponzi scheme, and for personal and unrelated business expenses. For example, the individual defendants misused customer funds to start side businesses and for cash withdrawals, lavish trips, such as a sky diving trip, maid services, cars, home improvements and real estate, such as purchasing 47 acres of land and constructing a lavish home.

To conceal the fraud, Simmons, with the assistance of Salazar, Coats and Davey, issued false customer account statements reflecting the promised returns or more based on Black Diamond’s purportedly successful forex trading. However, as of early 2009, the defendants allegedly could not meet customers’ requests for their funds, yet reassured customers that their funds were safe. During this time, they also allegedly continued to solicit new customers, accept additional deposits from existing customers and issue monthly statements to all customers showing significant forex trading profits.

Like this article? Sign up to our free newsletter

Most Popular

Further Reading