Two people accused of committing large-scale foreign exchange fraud have been charged by a major US regulator.
The Commodity Futures Trading Commission, which is responsible for regulating options and futures, has accused the two people of carrying out fraudulent business transactions as well as misinforming members of the public about margin-based currency contracts.
The first defendant, Morgan Hunt, is based in the Texas city of Arlington and is the current boss of the Diamonds Trading Investment House company.
The second, Kim Hecroft, founded a firm called First Options Trading and is believed to be from Baltimore in Maryland.
According to industry media, the pair are also accused of fraudulent behaviours in various other financial market sectors including binary options, which are considered by the wider industry to be illegitimate products, and diamonds.
The court documents, which were filed in the US District Court in the Northern District of Texas, allege serious and multifaceted fraud.
On some occasions, the pair told potential investors that they had good financial product management experience – which was, allegedly, misinformation.
They also told their actual customers that the investments were working out well and, according to the CFTC, they created “fake account statements” in an attempt to bolster this illusion.
In a particularly serious allegation, the pair are accused of claiming to act on behalf of the CFTC. They allegedly told some of the investors that it would not be possible for them to access their supposed earnings until they had transferred a sum of money to the CFTC for tax reasons, despite the fact that the CFTC has no tax collection powers.
In one alleged case, one of the defendants even asked someone to pretend to be a CFTC staff member over the phone in order to extract the fictional tax.
As a result of the alleged crimes, the CFTC is seeking a number of damages, including payments to cover cash taken from investors.
“In its continuing litigation, the CFTC seeks restitution to defrauded persons, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC Regulations, as charged”, it said in a statement.
A spokesperson for the CFTC said that the organisation was “on guard” against those who tried to impersonate the body.
“Increased public awareness of the CFTC’s involvement in policing the virtual currency markets has, unfortunately, provided new opportunities for bad actors”, said James McDonald, Director of Enforcement.
“As alleged in the Complaint, Defendants sought to exploit public trust in the CFTC through forged documents purporting to be official CFTC memoranda requiring the payment of a tax on cryptocurrency accounts. The CFTC does not collect taxes.
“The CFTC is on guard against fraudsters who try to take advantage of the CFTC’s reputation in order to cheat customers, and will take swift action against such misconduct”, he added.
Five members of the CFTC staff have been assigned to investigate this case. The CFTC’s Division of Enforcement Virtual Currencies Task Force has also worked on it.