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CFTC charges investment firms in USD85m forex Ponzi scam

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The US Commodity Futures Trading Commission has charged SNC Asset Management, SNC Investments, chief executive officer Peter Son, and chief financial officer Jin K.

The US Commodity Futures Trading Commission has charged SNC Asset Management, SNC Investments, chief executive officer Peter Son, and chief financial officer Jin K. Chung with operating a USD85m fraudulent foreign currency scam involving approximately 500 customers.

The CFTC seeks an emergency restraining order freezing assets and preserving the records of the defendants

The CFTC’s complaint charges defendants with misappropriating customer funds to pay off other customers and to pay personal and business expenses.

The defendants are also charged with fraudulent solicitation and the issuance of false statements to customers to conceal their misappropriation and lack of trading. As alleged, defendants abruptly closed operations, and Son and Chung disappeared.

Stephen J. Obie, acting director of the CFTC’s division of enforcement, says: ‘This is yet another example of the insidious nature of fraudulent investment schemes that target affinity groups. Based on personal relationships, people were lured into parting with their hard-earned money, only to learn, too late, that they were the victims of a massive forex fraud. The CFTC has been vigilant in taking quick action to stop such schemes as soon as they are discovered and bring these fraudsters to justice.’

Allegedly, since at least 2000 the defendants fraudulently solicited members of the Korean community of the San Francisco Bay area, where defendants Son and Chung lived. The defendants falsely claimed to be successful forex traders, touting a purported track record of 50 per cent annual returns and guaranteeing monthly returns of two per cent to three per cent. Solicitation materials boasted that SNC was a leading forex firm in the industry.

Each month, defendants allegedly provided account statements showing the promised steady returns, and they continued to solicit new funds. Over the last year of operation, defendants took in approximately USD22m in new funds with millions coming in shortly before they shut down.

The defendants, however, appeared to have engaged in little trading on behalf of customers. What little trading they actually did was unprofitable. Instead, they misappropriated funds to pay returns and principal to customers, to pay for personal expenses, including mortgage payments on Son’s luxury home, to funnel money to the relief defendant, and to meet the capitalization requirements of SNC Investments.

The CFTC complaint also charges SNC Investments, a futures commission merchant registered with the CFTC, with violating minimum net capital requirements and withholding notice of its undercapitalization.

The CFTC complaint names Ann Lee as a relief defendant because she received monthly funds as purported wages, although she performed no services for SNC. Ann Lee is the wife of Son.

In addition to the emergency relief seeking to freeze assets, repatriate funds, preserve records and enjoin the fraudulent activity, the CFTC seeks restitution, disgorgement, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws and against further trading.

Son has appeared in federal court in Oakland, California on federal criminal charges. In a separate action, the US Securities and Exchange Commission also filed charges against the defendants.

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