CFTC Charges US Trader with FX and Commodities Fraud

The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against Dro Kholamian and his company Blue Star Trading for ongoing foreign exchange (Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term) and commodities fraud, the regulator announced on Monday.

The complaint follows on from a US Judge in Illinois entering a Statutory Restraining Order on November 30, 2018, to freeze the assets of Kholamian and Blue Star Trading and to prevent them from destroying their books and records.

The CFTC complaint details

According to the complaint, from around January 2013 up until the present Kholamian, a long-time commodity and former floor broker fraudulently solicited clients to trade leveraged off-exchange forex and commodity futures. However, Kholamian and his company did not trade all of the clients’ funds and instead misappropriated around $775,000 from at least three individuals.

The complaint alleges that Kholamian attracted investors by promising them a 10-20 percent return on a $25,000 investment, generated over 12 months. He promised his clients that they could withdraw their funds at any time, without penalty.

These individuals were acquainted with Kholamian through his local Armenian community, the complaint states. Overall, he may have managed to solicit $1.9 million from more than 30 clients.

However, once a client opened a trading account, despite Kholamian’s reassurances that their investments were “doing well” he was actually using these expenses both for his personal expenses such as paying medical bills, business expenses and making cash withdrawals, as well as paying other clients to cover their returns, similar to a Ponzi Scheme Ponzi Scheme A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and Read this Term.

Despite his promises, when clients asked to withdraw their funds, Kholamian ignored these demands. Furthermore, he lied about trading conditions, stating that they prohibited him from giving back their money, saying for instance that he was “tied up in trades.” After the demands persisted, he issued two cheques worth $25,000, allegedly knowing full well he didn’t have sufficient funds to clear them.

CFTC is seeking full restitution

The CFTC is seeking “full restitution to defrauded clients,” the statement said. This includes disgorgement of ill-gotten gains, a civil monetary penalty and permanent registration and trading bans. In addition, the commodities regulator wants a permanent injunction against the defendants to prevent further violations of the Commodity Exchange Act and CFTC Regulations, as charged.