SEC and CFTC Act to Halt New Fraud
Another fraud was unveiled today as the SEC and the CFTC worked in conjunction to halt a ponzi scheme which purportedly made great returns by trading in the off-exchange foreign currency (forex) markets. The scammer was a member of the deaf community and perpetrated the fraud on others in the deaf community – a classic example of affinity fraud. The press releases from both the SEC and the CFTC are reprinted below.
This fraud comes on the heels of other well publicized frauds within the investment management industry including:
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SEC Halts Ponzi Scheme Targeting Deaf Investors
FOR IMMEDIATE RELEASE
2009-30
Washington, D.C., Feb. 19, 2009 — The Securities and Exchange Commission has obtained a court order halting a Ponzi scheme that specifically targeted members of the Deaf community in the United States and Japan.
The SEC alleges that Hawaii-based Billion Coupons, Inc. (BCI) and its CEO Marvin R. Cooper raised $4.4 million from 125 investors since at least September 2007 by, among other things, holding investment seminars at Deaf community centers. The SEC also alleges that Cooper misappropriated at least $1.4 million in investor funds to pay for a new home and other personal expenses. The order obtained by the SEC freezes the assets of BCI and Cooper.
“This emergency action shows that the Commission will act quickly and decisively to help victims of affinity fraud,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.
“A Ponzi scheme targeting members of the Deaf community is particularly reprehensible,” said Rosalind R. Tyson, Regional Director of the SEC’s Los Angeles Regional Office. “This case is an example of successful coordination between federal and state agencies to protect vulnerable investors.”
The SEC’s complaint, filed yesterday in federal court in Honolulu, alleges that BCI and Cooper represented to the investors that their funds would be invested in the foreign exchange (Forex) markets, that investors would receive returns of up to 25 percent compounded monthly from such trading, and that their investments were safe. According to the complaint, BCI and Cooper actually used only a net $800,000 (cash deposits minus cash withdrawals) of investor funds for Forex trading, and they lost more than $750,000 from their Forex trading. The complaint further alleges that BCI and Cooper failed to generate sufficient funds from their Forex trading to pay the promised returns, and instead operated as a Ponzi scheme by paying returns to existing investors from funds contributed by new investors.
The SEC alleges that BCI and Cooper have violated the registration and antifraud provisions of the federal securities laws. In its lawsuit, the SEC obtained an order temporarily enjoining BCI and Cooper from future violations of these provisions. The SEC also obtained an order: (1) freezing the assets of BCI and Cooper; (2) appointing a temporary receiver over BCI; (3) preventing the destruction of documents; (4) granting expedited discovery; and (5) requiring BCI and Cooper to provide accountings. The Commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against both defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for March 2, 2009, at 9 a.m. HST.
The Commodity Futures Trading Commission (CFTC) also filed an emergency action yesterday against BCI and Cooper, alleging violations of the antifraud provisions of the Commodity Exchange Act. The State of Hawaii’s Department of Commerce and Consumer Affairs (DCCA), Office of the Commissioner of Securities, issued a preliminary order to cease and desist against BCI and Cooper.
The Commission acknowledges the assistance of the Hawaii DCCA’s Office of the Commissioner of Securities and the assistance of the CFTC in this matter.
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For more information, contact:
Andrew Petillon
Associate Regional Director, Los Angeles Regional Office
(323) 965-3214
Kelly Bowers
Senior Assistant Regional Director, Los Angeles Regional Office
(323) 965-3924
John B. Bulgozdy
Senior Trial Counsel, Los Angeles Regional Office
(323) 965-3322
http://www.sec.gov/news/press/2009/2009-30.htm
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Release: 5614-09
For Release: February 19, 2009
CFTC Charges Hawaii-based Marvin Cooper and Billion Coupons, Inc. with Operating a $4 Million Foreign Currency Ponzi Scheme Aimed at Defrauding the Deaf Community
Court Freezes Defendants’ Assets and Appoints Temporary Receiver
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it charged Marvin Cooper and his company Billion Coupons, Inc. (BCI), both of Honolulu, Hawaii, with operating a Ponzi scheme that involved more than 125 customers — all of whom are Deaf — in connection with commodity futures trading and foreign currency futures (forex) trading.
The CFTC alleges that since at least September 2007, Cooper and BCI solicited approximately $4.4 million from more than 125 Deaf American and Japanese individuals for the sole purported purpose of trading forex. Also, according to the complaint, while Cooper and BCI opened both forex and futures accounts with approximately $1.7 million of customer money, Cooper misappropriated more than $1.4 million of customer funds for personal use. Cooper allegedly used the misappropriated funds to purchase computer and electronic equipment, flying lessons, and a $1 million home. He also allegedly returned approximately $1.6 million to customers as purported “profits” and as commissions to employees and agents.
“This case is a clear example of affinity fraud: Cooper preyed upon the Deaf community to leverage and exploit the inherent trust within so that his scheme would prosper. The CFTC urges the public to be cautious with their investments even when opportunities are presented by those with whom they have an association,” said CFTC Acting Director of Enforcement Stephen J. Obie.
Cooper and BCI allegedly lured in customers with promises of 15 to 25 percent monthly returns, depending on the amount and size of the customer’s investment, while representing that the investment would be low risk and that the promised return was produced by their successful trading. Cooper and BCI, however, were running a Ponzi scheme since the purported “profits” paid to customers came from existing customers’ original principal and/or from money invested by subsequent customers.
Finally, the complaint alleges that to conceal and perpetuate their fraud, Cooper and BCI provided customers with false account statements representing that their accounts were increasing by as much as 25 percent, when, in fact, the accounts were collectively losing money every month.
Court Orders Freeze of Assets and Appoints Temporary Receiver
On February 18, 2009, the Honorable J. Michael Seabright of the United States District Court of Hawaii granted the CFTC’s request for emergency action by, among other things, freezing Cooper’s and BCI’s assets, granting immediate access to Cooper’s and BCI’s documents and appointing Barry Fisher as temporary receiver. Judge Seabright ordered Cooper and BCI to appear in court on March 2, 2009, at 9 a.m. for a preliminary injunction hearing. In the continuing litigation, the CFTC seeks restitution, disgorgement, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws and against further trading.
The CFTC requests that all victims of Cooper’s and BCI’s actions contact the temporary receiver at (310) 557-1077.
The CFTC appreciates the assistance of the Securities and Exchange Commission (SEC). The SEC simultaneously filed a related emergency action against Cooper and BCI. The CFTC also wishes to thank the State of Hawaii, Department of Commerce and Consumer Affairs, Office of the Commissioner of Securities.
The following CFTC Division of Enforcement staff members are responsible for this case: Kenneth W. McCracken, Elizabeth Davis, Michael Loconte, Rick Glaser, and Richard Wagner.
Last Updated: February 19, 2009