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Texas resident charged with operating forex Ponzi scheme

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The US Commodity Futures Trading Commission has charged Willie L. Cloud, Jr. and his investment company C & R Financial, both of Houston, Texas, with operating a Ponzi scheme in connection with foreign currency trading.

The CFTC’s complaint, filed on 4 March 2010, alleges that, since at least April 2008 Cloud and C & R Financial solicited at least USD200,000 from individuals for the sole purpose of trading forex.

Allegedly, the defendants promised several customers that they would each have personal accounts at a registered futures commission merchant, through which defendants would trade forex for them.

The defendants allegedly lured customers with promises of doubling or tripling their investments within a year through forex trading gains.

The defendants, however, opened an account in Cloud’s name, deposited only a portion of customers’ funds into the account and misappropriated at least USD75,000 of customer funds for personal use, according to the complaint.

The complaint also charges that defendants sent false account statements to customers showing large profits, when, in fact, defendants’ forex trading resulted in substantial losses.

Defendants allegedly returned approximately USD36,000 to customers as redemption of principal and purported profits. Because the defendants lost a substantial portion of customer funds in forex trading, the complaint alleges that the redemptions and purported profits came from the principal invested by existing or subsequent customers, thus constituting a Ponzi scheme.

On 9 March 2010, the Honourable Gray H. Miller of the US District Court for the Southern District of Texas ordered Cloud and C & R Financial to appear in court on 1 April 2010 for a preliminary injunction hearing.

In the continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties and a permanent injunction prohibiting further violations of the federal commodities laws.

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