SEC Charges Three with Promoting and Selling Forex Offering:
As a reminder of the risks associated with commodities and precious metals trading, please read the below litigation summary, which relates to the case of Securities and Exchange Commission v. Clifton K. Oram, et al., Case No. 2:10-CV-01173-DB (D. Utah). This real life example demonstrates how far unscrupulous individuals will go to separate investors from their money.
The Securities and Exchange Commission’s (“Commission”) complaint alleges that Clifton K. Oram, Don C. Winkler and William R. Michael engaged in fraud by offering and selling investments in a foreign currency exchange trading (“Forex”) program issued by a Mexican entity known as MexGroup or MexBank.
The Commission’s complaint alleges that since at least 2007, Oram, Winkler and Michael collectively raised tens of millions from investors nationwide for MexGroup’s Forex trading program. The defendants attracted investors by, among other things, touting impressive monthly returns posted on MexGroup’s web site. In early December 2008, however, investors learned that their accounts were virtually wiped out in the previous month. MexGroup gave a number of explanations, eventually blaming allegedly illegal conduct by a Swiss Forex trading firm through which it executed trades.
The Complaint further alleges that beyond the fact that none of the defendants understood how the Forex market or Forex trading functioned, neither Oram, Winker or Michael took any significant steps to investigate MexGroup, its principals, or the viability of the investment. Instead, they blindly accepted MexGroup’s representations about its background, veracity, and track record. Further, Michael and his company used MexGroup’s purported performance numbers on his company’s website and made misleading representations and omissions regarding their own Forex trading experience. Even more egregious, Winkler and Oram continued to offer and sell the MBFX offering even after the November 2008 collapse.
In its complaint, the Commission alleges that the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission is seeking permanent injunctions, disgorgement with prejudgment interest and civil penalties against all three defendants.
This action arose from a joint SEC cooperative enforcement investigation with the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS) and the U.S. Commodities Futures Trading Commission (CFTC). Notably, on November 30, 2010, the CFTC filed a complementary action in the U.S. District Court for the District of Utah, entitled CFTC v. MXBK Group S.A. de C.V., which alleges violations of U.S. federal commodities laws by MXBK and MBFX, associated entities of MexGroup.
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