The US Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges against Forex Auto Profits, LLC (FAP) and its founder, Darren L Shanks, formerly of South Jordan, Utah, for fraud and misappropriation in connection with operating a foreign currency (forex) scheme.
The CFTC order requires FAP and Shanks to pay civil monetary penalties of USD750,000 and USD500,000, respectively. FAP and Shanks also are ordered jointly and severally to pay restitution of USD1,702,770.94 and are permanently barred from engaging in any commodity-related trading activities, including soliciting funds, registering with the CFTC and trading on behalf of themselves or others.
The order finds that, from October 2007 to September 2009, Shanks received approximately USD3.3 million from more than 45 investors to trade forex through false representations regarding his trading history, including that he typically generated monthly returns of three to five percent.
However, the order finds that Shanks did not generate profits from the investors’ money in forex trading and admitted that every monthly investor statement falsely represented profits being generated and that the trading details were similarly fictitious. In addition, the order finds that respondents, through Shanks, misappropriated customer funds to pay personal and business expenses and to make distributions to other participants. Shanks used customer funds to pay for a variety of personal uses, including trips throughout the United States, car and house payments and satisfaction of support obligations, the order finds.
The order further finds that Shanks failed to disclose to investors his prior criminal conviction in 1998 for embezzlement from a bank.
In a related criminal action in July 2010, Shanks pleaded guilty to wire fraud in connection with a scheme to defraud or obtain money or property by means of materially false pretences, representations or promises. Shanks is now serving a 41-month federal prison sentence. Criminal restitution was set at USD1,702,770.94, which offsets restitution of the same amount entered in the CFTC’s order.
