Forex Trader Charged in Offering Fraud
Offering frauds are one of the largest groups of cases regularly filed by the SEC’s Division of Enforcement. While the actions take on various forms, typically investors are induced to part with their investment funds by offers that are too good to be true, made by a trusted friend, or in some cases, a claimed expert. A claimed “expert” was at the center of the Commission’s most recent example of these cases. SEC v. Fernandez, Civil Action No. 4:22-cv-04365 (S.D.Tx. Filed December 16, 2022).
Defendant John Fernandez is the founder, manager and CEO of two entities also named as defendants – Avail Progression, LLC and Elite Generators, Inc. Mr. Fernandez is a self-taught trader who claims to have expertise in the foreign exchange market or Forex.
Over a four-year period, beginning in early 2017, Mr. Fernandez raised over $4.3 million from about 175 investors. The transactions centered on the sale of securities in either Avail Progression or Elite Generators. Investors were induced to make the investments by the promise of guaranteed funds tied to trades in the forex markets.
Typically, investors were required to execute a Promissory Note to purchase the securities of Avail Progression. That Note outlined the terms of the transaction. Specifically, it listed the date of the initial investment, the amount of monthly return, and the dates on which the returns would be paid.
Despite having represented that the investor funds would be used to trade in the forex markets, Defendant did not use any of the funds raised during the Avail Progression offering to trade in the those markets. Rather, a portion of the funds were put in Defendant Fernandez’s Coinbase account. Other funds were used for his personal expenses.
The sale of securities of issued by Elite Generators followed a similar pattern. In selling the securities of this firm Defendant Fernandez required investors to execute an Investment Contract. While the terms were similar to those of the Promissory Notes, they did not require any investment in the forex markets. Mr. Fernandez did tell potential investors that their funds would be invested in those markets, however. Ultimately, much of the money was used for personal expenses or to make Ponzi like payments. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 25593 (December 16, 2022).