Forex Firm Caught Operating a Ponzi Scheme

The CFTC just announced that it charged a group out of Atlanta with operating a Ponzi scheme.  This is the first action the CFTC has brought against a forex firm for fraud.  At the beginning of last year Congress passed the Farm Bill which provided the CFTC with more authority for regulating the off-exchange foreign currency markets (also known as the spot forex markets).  This action indicates that the CFTC is serious about cleaning up the forex markets.  As we’ve detailed before, forex registration will be coming shortly. 

The release is reprinted in its entirety below.  Other related forex law and registration articles include:

• Forex Hedge Fund
• Managed Forex Funds
• What is Forex?  Forex Overview
• Forex Registration Requirements
• Forex Fraud

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Release: 5598-09
For Release: January 15, 2009

CFTC Charges James Ossie and CRE Capital Corporation with Operating a $25 Million Foreign Currency Ponzi Scheme

Georgia Man and Corporation Allegedly Ripped Off 120 Investors

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it charged James Ossie of Atlanta, Georgia, and his company CRE Capital Corporation (CRE) of Alpharetta, Georgia with operating a Ponzi scheme involving more than 100 people and approximately $25 million in connection with foreign currency transactions (forex). Ossie resides in Dawsonville, Georgia and is president and sole owner of CRE; neither has ever been registered with the CFTC.

According to the CFTC’s complaint, Ossie and CRE promised pool participants that they would earn a 10 percent return on their money within 30 days by trading United States and Japanese currency pairs. The complaint further alleges that since June 18, 2008, rather than making money for pool participants, Ossie and CRE lost approximately $4.4 million trading forex. Finally, the complaint alleges that Ossie and CRE operated a Ponzi scheme, in which forex trading “profits” were actually paid from the principal of subsequent pool participants.

“Investors must run the other way when approached by anyone claiming to guarantee exorbitant monthly returns, like those promised by CRE and Ossie. Such representations should raise an immediate red flag that such investment is too good to be true,” said CFTC Acting Director of Enforcement Stephen J. Obie. “We are seeing an uptick in Ponzi scheme cases because, in this economic climate, new investors cannot be found to perpetuate the scheme. As these schemes collapse, the CFTC will move swiftly to prosecute those who harm innocent investors.”

This is the first case brought by the CFTC’s Forex Enforcement Task Force under the new powers granted to the Commission under the Food, Conservation, and Energy Act of 2008 (see CFTC Press Release 5530-08, August 11, 2008).

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 appreciates the assistance of the Securities and Exchange Commission (SEC). The SEC filed a related action against Ossie and CRE.

The following CFTC Division of Enforcement staff members are responsible for this case: Daniel Jordan, James Deacon, William Small, Mike Loconte, Rick Glaser, and Richard Wagner.
Last Updated: January 15, 2009