SEC, CFTC Halt Fraudulent Forex Trading Scheme

The SEC and the CFTC joined forces to halt an on-going forex trading scheme being conducted by an individual who had previously been barred by the New York Stock Exchange. Before the two agencies could secure a freeze order from the court, the investing public had, unfortunately, parted with over $7.1 million in a matter of months , of which $1.7 million has been diverted to the personal use of one defendant. SEC v. White, Civil Action No. 4:13-CV -3883 (E.D. Tex. Filed July 9, 2013); CFTC v. RFF GP LLC, Civil Action No. 4:13-cv-00382 (E.D. Tex. Filed July 9, 2013).

Kevin White, JGW Capital Management LLC, Revelation Forex Fund, LP and RFF GT, LLC are the defendants in these actions. Mr. White began in the securities business in 1982 with Lehman/American Express, Inc. He was terminated by the firm. Later he joined E.F. Hutton which then merged with Shearson Lehman. The new firm terminated him failing to disclose his prior termination. Mississippi, Florida and Illinois took action against him as a result of customer complaints. By mid-1992 the New York Stock Exchange censured and barred him for four years from employment or association with a member organization. Each of the entity defendants is controlled by Mr. White.

Beginning in September 2011, just three months after Revelation was formed, Mr. White and KGW Capital began soliciting investors. Revelation was supposed to utilize a complex trading strategy in the forex markets to obtain superior returns for clients. Investors were told that Revelation had total returns of more than 393% from its inception in January 2009 – over two years before the firm was formed. The fund was touted as having a compound annual rate of return of more than 36%. Thus, investors were told that an initial investment of $250,000 in the fund in January 2009 would have grown to about $964,591 by the end of April 2013 and to $983,111 by the end of May 3013.

Contrary to the representations made to investors, through May 31, 2013 the fund had suffered trading losses of about $550,000. Revelation also had unrealized losses of $1,419,600 from the inception of trading in September 2011.

Potential investors were not provided with an accurate description of Mr. White’s background. Investors were told that he had a stellar record with 25 years of experience in the industry. They were not told about the NYSE action or those of the state regulators.

The SEC’s complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The court granted a freeze order at the time the complaint was unsealed. The action is pending. See also Lit. Rel. No. 22750 (July 12, 2013).