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CFTC Targets FX Ponzi Scheme

The Commodity Futures Trading
Commission (CFTC) says it has
obtained a Federal court consent order of
permanent injunction requiring defendants
Sidney Charles, Jr and his company the
Borrowing Station, from Maryland, jointly
and severally to pay $254,236 in
restitution and a $350,000 civil monetary
penalty in connection with an off-
exchange leveraged FX Ponzi scheme.

The order also imposes permanent
registration and trading bans against both
defendants and prohibits them from
further violations of the Commodity
Exchange Act (CEA) and CFTC
regulations, as charged. The order stems
from a CFTC complaint filed on April 23,
2012, that charged the defendants with
solicitation fraud, misappropriation,
issuing false statements, and registration

The order finds that, from at least
October 2009 through at least July 2011,
the defendants fraudulently solicited
$369,326 from 18 individuals or entities
for participation in a pooled investment
vehicle managed by Borrowing Station,
through Charles, that traded FX.
According to the order, the defendants 
solicited pool participants directly and
through a website. In their solicitations,
the defendants promised substantial
investment returns such as 25% per year
or 10% per month, and falsely claimed
that pool participant funds were
guaranteed against trading losses. The
Order finds that the defendants deposited
only a portion of pool participant funds
into trading accounts and lost a majority
of those funds unsuccessfully trading FX.

The order also finds that the defendants
issued checks to pool participants that
represented purported “monthly returns”
or “return on investment.” However, any
purported profits that the defendants paid
to pool participants allegedly came from
the principal of other pool participants in
the manner of a Ponzi scheme. In
addition, Charles misappropriated pool
participant funds to pay for personal
expenses and to fund Borrowing Station’s
operations, according to the order.

The order further finds that Borrowing
Station and Charles failed to register as a
Commodity Pool Operator (CPO) and
Associated Person of a CPO, respectively,
as required under the CEA and CFTC

Paul Gogliormella

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