North Carolina Man Charged With $2 Million Forex Ponzi Scheme
The Commodity Futures Trading Commission filed civil fraud charges against a North Carolina man, accusing him of operating a foreign exchange trading Ponzi scheme that took in over $2 million from at least two dozen investors. Barry C. Taylor, along with his companies OTC Investments LLC and Foreign Currency Trade Advisors, LLC, was charged with multiple violations of the Commodity Exchange Act. The CFTC is seeking injunctive relief, disgorgement of ill-gotten gains, restitution to defrauded victims, an accounting of funds, and civil monetary penalties.
The CFTC's complaint alleges that Taylor solicited potential investors with the promise that their funds would be used for foreign exchange trading that generated a guaranteed minimum monthly return of at least 2%. Investors were assured that Taylor would only receive "administrative fees and commissions" from any amount exceeding the 2% profits paid out to investors, and Taylor guaranteed that investors could not sustain a loss higher than 15% without the automatic cessation of trading. In total, Taylor and his companies took in nearly $2.5 million from at least 24 investors.
After a participant requested a redemption of their investment in late 2014, Taylor sent an email to several investors indicating that the recent foreign currency market swings had resulted in the suspension in trading of their funds. Taylor further indicated that he hoped to begin trading the following week. However, the CFTC alleged that these claims were false, as Taylor's accounts had already been frozen at one currency trading firm prior to the events in the currency market while he continued to trade at another currency trading firm. The CFTC also alleged that Taylor's promises of guaranteed 2% profits were in stark contrast to actual trading losses suffered of nearly $500,000 as of January 2015. Taylor allegedly used participant funds for his own personal expenses, including the purchase of real estate, luxury watches, entertainment, and living expenses. Despite the alleged trading losses and diversion of investor funds for personal expenses, Taylor allegedly used investor funds to make interest payments to existing investors in Ponzi-like fashion to add to the scheme's legitimacy.
Interestingly, while the CFTC's complaint pinpoints the beginning of Taylor's scheme as no later than August 2011, an interesting internet forum post suggests that the scheme may have started at least a year earlier. The aptly-named Scam.com, which provides a centralized forum for posters to trade notes over various scams du jour, contains a post with an initial post on September 19, 2010 stating that:
I invested 10,000.00 with Mr. Taylor over a year ago to invest in the forex market. I was told that it had gained about 10% in 6 months. I requested my funds and it was supposed to take 60 days to get them. I was then told the balance had lost 50%. It has now been 9 months and i have gotten 25% of my money and a whole lot of broken promises. I never got any documentation and suspect that I was a victim of a ponzi scheme.
Interesting, a later post in January 2011 from BCTAYLOR - which seems to be an abbreviation for Barry C. Taylor - claims that:
In the first place the money was never invested with me personally. It went into a fund that I was one of 5 traders. In addition, the poster reached a settlement with the fund months ago and has received 80% of the settlement. The balance will be paid once this post has been removed. This should never have been posted against me individually.The CFTC's complaint is below:
Despite subsequent questions for information from BCTAYLOR, that was his first and last post. The original poster later posted (in quotes) that:
"There were informational errors unknown to me when I posted the previous report and I am withdrawing my complaint at this time! I have received the information I requested and reached an agreement with the company. Mr. Taylor was only the trader and my contact with the company. I realize that the forex market is erratic and proifts come and go quickly. Anyone investing in the forex market should be aware that their capital is at risk and subject to be lost."
A copy of the CFTC's Complaint is below: