Unauthorised FX Fund Manager to Pay $17 million in Sanctions for Currency Fraud

The U.S. Commodity Futures Trading Commission announced that it obtained a federal court order of default judgment and permanent injunction requiring defendant Christopher B. Cornett of Buda, Texas, to pay $10.16 million in restitution and a $6.78 million civil monetary penalty in connection with a foreign currency (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) pooled investment fraud. The order, entered on August 24, 2012, by Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, also imposes permanent trading and registration bans against Cornett and permanently prohibits him from further violations of federal commodities law, as charged.

The court’s order stems from a CFTC complaint filed on February 2, 2012, charging Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register as a commodity pool operator (see CFTC Press Release 6175-12, February 8, 2012).

The order finds that, from at least June 2008 through at least October 2011, Cornett solicited prospective pool participants to invest in a pooled forex investment and that he acted as the manager and operator of the pool. The pool was referred to at various times as ITLDU, ICM, International Forex Management, LLC, and/or IFM, LLC, according to the order. In his solicitations, Cornett falsely told prospective pool participants that, while there were weeks when he either lost money or broke even trading forex, he had never experienced a losing month or a losing year trading forex, the order finds.

The order also finds that, from June 18, 2008 through September 2010, Cornett solicited approximately $7.07 million from pool participants, participants redeemed approximately $1.64 million, and Cornett lost approximately $4.17 million of the pool’s funds trading forex. During this period, Cornett had only one profitable month trading forex and earned little, if any, fees for acting as the pool’s operator, the order finds. Thus, during this period, Cornett misappropriated approximately $1.26 million of the pool’s funds and for most, if not all of the period, provided participants with false weekly reports/account statements, the order finds.

The court’s order further finds that, from October 2010 through October 2011, Cornett solicited an additional approximately $6.95 million from pool participants. Cornett transferred approximately $3.37 million to Forex Trading Forex Trading Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying Read this Term accounts at six foreign brokers and lost approximately $2.3 million at five of the brokers, and likely lost an additional $905,000 at the sixth broker trading forex with pool funds, the order finds. As of October 2011, Cornett had misappropriated approximately $1 million of the pool’s funds and less than $520,000 remained in bank accounts in the names of the pool, according to the order.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Texas, Internal Revenue Service Criminal Investigation, and the Federal Bureau of Investigation.