Fraud in CFTC-Regulated Markets

August 8, 2023

BNP Paribas, Société Générale, Wells Fargo, and Bank of Montreal have been ordered to pay a combined $260 million for violating CFTC rules around recordkeeping and supervision.  Separately, two of those institutions, BNP Paribas and Wells Fargo, along with BMO Capital Markets Corp., Houlihan Lokey Capital, Inc., Mizuho Securities USA LLC, Moelis & Company LLC, SMBC Nikko Securities America, Inc., and Wedbush Securities Inc., have agreed to pay a combined $289 million for violating similar SEC rules.  The financial institutions were found to have failed to maintain, preserve, or produce communications sent via unapproved channels, such as personal texts.  With this enforcement action, the CFTC has recovered over $1 billion from actions against 18 financial institutions for similar charges, while the SEC has recovered over $1.5 billion from actions against 30 financial institutions.  CFTC, SEC

July 12, 2023

Florida man Adam Todd and his companies, Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation, have been banned from registering with the CFTC and trading in CFTC-regulated markets, and ordered to pay almost $4 million in disgorgement and $12 million in civil monetary penalty.  According to the agency, the defendants failed to register with the CFTC, failed to comply with certain regulations, attempted to manipulate the price of a digital asset token, and violated anti-money laundering procedures.  CFTC

July 5, 2023

The operators of four feeder funds who failed to register with the CFTC and violated commodity pool regulations have been ordered to pay over $10 million cumulatively.  Hemraj Singh and King Royalty, LLC were ordered to pay about $7 million in restitution and civil monetary penalties, while Surujpal Sahdeo and SR&B Investment Enterprises, Inc., Randy Rosseau and Bull Run Advantage, LLC, and Daniel Cologero and Green Knight Investments, LLC were each ordered to pay under $1 million.  In addition to registration violations, the individuals and their companies collected almost $58 million from investors but used less than $2.5 million for their intended purpose of forex trading, while issuing false statements to investors showing only profits and no losses.  CFTC

July 3, 2023

Argent Asset Group LLC, First State Depository Company, LLC, and owner Robert Higgins have been ordered to pay a total of $146 million for making false representations to prospective precious metals investors and misappropriating tens of millions of dollars.  Through a fraudulent silver leasing program called the Maximus Program that promised guaranteed monthly lease payments, the defendants convinced some 200 unsuspecting customers into storing their assets with Argent.  Unbeknownst to customers, however, the defendants failed to adequately insure those assets despite making representations about coverage, and misappropriated client assets.  CFTC

June 28, 2023

Michael Ackerman of Ohio has been banned from participating in CFTC-regulated markets and ordered to pay $27 million in restitution as well as $27 million in civil monetary penalties for operating a digital asset fraud scheme.  He was also ordered to pay $31 million in restitution and serve 5 years of probation and 1 year of home confinement in a related criminal proceeding.  According to the CFTC, Ackerman solicited funds from more than 150 individuals and entities under the guise of using the funds to invest in digital commodity assets.  He was ultimately able to raise at least $33 million, but misappropriated all but $10 million for his personal use.  CFTC

June 15, 2023

Wisconsin woman Kay Yang and her companies AK Equity Group LLC and Xapphire LLC have agreed to pay almost $13.7 million in restitution and over $10.4 million in civil monetary penalty in connection with a fraudulent scheme targeting the Hmong community.  Yang’s husband, Chao Yang, was also ordered to pay $1.42 million in disgorgement.  From 2017 until the pandemic hit in March 2020, the defendants solicited and received at least $15.7 million from 67 victim individuals or entities, many from the Hmong community.  The funds were intended for retail forex transactions, but the defendants misappropriated at least $4.8 million.  Under the settlement order, there is a permanent injunction against Kay Yang and her companies from participating in commodity exchange.  CFTC