Three Charged in Forex Fraud Scheme
Offering fraud actions are clearly a stable of the Commission’s Enforcement Division. In the last few years this category of cases has been at or near the top of a list of actions brought by the agency. The cases range from those where a legitimate business encounters difficulties and tries to work its way out while continuing to raise money in the capital markets without success to those which are Ponzi schemes. In between these extremes are a range of cases involving companies and persons conducting a wide variety of fraudulent schemes.
A new case brought in the Southern District of Florida appears to be adding a new wrinkle, however. In this case two U.S. citizens joined with a friend from the Netherlands to create losses in forex trading with investor funds as an apparent cover before all the investor funds disappeared to some distant part of the world. U.S. v. Gallagher (S.D.Fla. indictment returned April 8, 2021).
Patrick Gallagher and Michael Dion are U.S. citizens. Emade Ecadi is from the Netherlands. Each was named in an indictment containing counts of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering.
The underlying scheme traces to 2012. The three men began soliciting investors to entrust their investment funds to Global Forex Management, their firm. Large returns were promised. The returns were to be generated by the online trading platform of Mr. Echadi’s firm, 1B Capital.
Defendants began trading. They suffered losses. Defendants cut the losses by halting the trading. About $30 million in investor funds was stolen. The investor money was channeled through a series of off-shore entities they had set-up in various parts of the world. Clients were then shown fabricated trading records reflecting profits. The case is pending.