Two US men pleaded guilty on Friday to their role in pulling off a massive foreign exchange (forex) trading scam and the theft of $30 million in investor deposits.
According to the US justice department press release, each of them pleaded to one count of conspiracy to commit securities fraud. Both of them are now looking at a maximum prison time of five years, which a US federal court judge will determine at a later date.
Patrick Gallagher and Michael Dion, who are residents of Massachusetts and Florida, respectively, ran the company, Global Forex Management and operated the fraudulent scheme. They promised 'large returns' to the investors and fabricated previous trading results to lure them into investing in the scheme.
Both the perpetrators told the victims that the collected funds will be used in trading foreign exchange on an online trading platform provided by IB Capital, a company that turned out to be a co-conspirator of the fraud.
“Instead, Gallagher and Dion were working with other co-conspirators in the Netherlands to steal the victim investors’ money,” the press release stated.
To effectively steal the investors’ funds, the perpetrators reported losing trades in May 2012, which were fabricated and were a part of the fraudulent scheme. Gallagher and Dion then routed the funds through shell companies that they had set up around the world to effectively hide the source of the funds.
Rampant FX Frauds
Forex trading fraud is rampant around the world as investors often fall for the tall promises of the fraudsters. In August, Finance Magnates reported on a $55 million FX trading scam pulled off by popular Thai Natthamon Khongchak, known to her followers as 'Nutty'. She swindled around more than 6,000 investors and then reportedly fled the country.
Earlier this year, the US court slapped more than $29 million in restitution and penalties on forex and binary options pool fraud and the operators, Financial Tree, Financial Solution Group and New Money Advisors, and other scheme associates.
Meanwhile, Belgium’s financial market regulator recently flagged dozens of illegal forex and other trading platforms that are operating in the country.
