The US Commodity Futures Trading Commission (CFTC) has obtained a federal court order freezing the assets of defendant Larry Benny Groover of Gunter, Texas, charged with operating a USD1.4 million foreign currency (forex) Ponzi scheme and misappropriating customer funds for his personal use. Groover has never been registered with the CFTC.
The order, entered on February 11, 2011, by Judge Richard Schell of the US District Court for the Eastern District of Texas, also prohibits the destruction of books and records and requires Groover to account for assets. The court scheduled a hearing on the CFTC’s motion for a preliminary injunction on February 22, 2011.
The court’s order arises from a CFTC anti-fraud civil complaint, filed under seal on the same day, charging Groover with misappropriating more than USD750,000 from at least 22 customers and committing fraud in the operation of a forex Ponzi scheme from June 18, 2008, to at least February 4, 2010. Groover allegedly issued false account statements to at least one customer, showing forex trading profits when, in fact, Groover lost nearly all of that customer’s funds trading forex.
Specifically, the CFTC complaint alleges that Groover solicited and received more than USD1.4 million to trade forex and commingled these customer funds with his personal funds. Groover allegedly used less than $650,000 of the solicited amount to trade forex and lost the majority of those funds trading.
Groover also allegedly misappropriated the remaining customer funds to make payments to past investors, as is typical of a Ponzi scheme. He further used misappropriated customer funds to pay for personal expenses, such as health and medical care, groceries, dining, cable television, auto repairs, gasoline and insurance, according to the complaint. Additionally, Groover allegedly used customer funds to purchase software and trade publications and to make payments directly to himself and his wife, Joanne Groover, also of Gunter, Texas. The CFTC complaint names Mrs Groover as a relief defendant because she allegedly received funds as a result of the defendant’s fraudulent conduct and has no legitimate entitlement to those funds. Mrs Groover is a joint account holder in the bank account in which customer funds were deposited and owns certain forex trading accounts where customer funds were deposited for trading, according to the complaint
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans and permanent injunctions against further violations of federal commodities laws.