C & R Financial Charged in Alleged Forex Ponzi Scheme
March 11, 2010
The Commodity Futures Trading Commission (CFTC) said it charged C & R Financial, Inc., and Willie L. Cloud, Jr., both of Houston, Texas, with operating a Ponzi scheme in connection with foreign currency (forex) trading.
The CFTC’s complaint, filed on March 4, alleges that, since at least April 2008, Cloud and C & R Financial solicited at least $200,000 from individuals for the sole purpose of trading forex.
Allegedly, the defendants promised customers that they would each have personal accounts at a registered futures commission merchant, through which defendants would trade forex for them. The defendants allegedly lured customers with promises of doubling or tripling their investments within a year through forex trading gains.
But, according to the CFTC complaint, the defendants opened an account in Cloud’s name, deposited only a portion of customers’ funds into the account and misappropriated at least $75,000 of customer funds for personal use.
The complaint also charges that the defendants sent false account statements to customers showing large profits, when, in fact, defendants’ forex trading resulted in substantial losses.
The defendants also allegedly returned approximately $36,000 to customers as redemption of principal and purported profits.
“Because the defendants lost a substantial portion of customer funds in forex trading, the redemptions and purported profits came from the principal invested by existing or subsequent customers, thus constituting a Ponzi scheme,” the CFTC said.
Cloud and C & R Financial are scheduled to appear in the U.S. District Court for the Southern District of Texas on April 1 for a preliminary injunction hearing.
The CFTC said it is seeking restitution, disgorgement of ill-gotten gains, civil monetary penalties and a permanent injunction prohibiting further violations of the federal commodities laws.
