One of the more recent cases of managed accounts forex fraud involves the now-defunct CMA Capital Management. The firm was based in Davie, Florida and was formerly run by a married couple, Claudio and Betty Aliaga. Read another entertaining story about Joel Nathan Ward who stole $ 11.3 million from more than 100 investors here.
The CFTC has charged both them and their companies, CMA Capital Management, LLC, of Miami Lakes, FL and CMA Global Investment (sic) Fund LLC with running a Ponzi scheme.
In essence, the CFTC alleges that they fraudulently solicited more than $4.5 million from at least 125 individuals. Apparently, they had falsely promised and faked profitable returns of two to three percent per month on forex-related investments.
The CFTC’s Allegations
The fraud complaint, which was filed April 6th, 2010, names both Betty Aliaga and the CMA Global Investement (sic) Fund LLC as relief defendants. Both accepted and received funds from Claudio Aliaga that were obtained through fraudulent conduct, and thus they have no legitimate entitlement to such funds.
According to the CFTC, the defendants had been fraudulently soliciting funds since at least March of 2007. They had apparently received in excess of $4.5 million from retail forex investors.
The fraud charges stem from certain allegations and material omissions made while soliciting the funds. The allegedly false statements included that:
- Mr. Aliaga was a successful foreign exchange trader.
- Mr. Aliaga’s expertise in forex trading would generate returns of 2-3% per month and that the returns would be paid out to customers consistently.
- The customers’ principal investment was not at risk of loss.
The material omissions included:
- Mr. Aliaga omitted that he had misappropriated his customer’s funds.
- Mr. Aliaga omitted that not all of the customer funds were used for forex trading.
The complaint also cites the fact that the defendants transferred only $1.9 million of the nearly $4.5 million collected from investors into forex trading accounts. Furthermore, the forex trading accounts that were opened by Aliaga had accumulated losses of about $673,000.
In order to perpetuate the fraud, the defendants apparently printed up fake account statements that they then sent to their clients. These false statements reflected the large returns of 2% to 3% per month, which the fraudsters had originally promised their investors.
Where the Money Went
Claudio Aliaga used only $1.9 million of the customer funds for trading, of which he lost $673,000. Most of the remaining millions were used for the Aliagas’ personal expenditures, and Aliaga even sent some of the money to his own Swiss bank accounts.
Aliaga used the rest of the money by purchasing two luxury cars and paying for travel expenses and his mortgage, among other items. In all, he took $438,000 in cash for himself. For her part, Mrs. Aliaga, who is a relief defendant in the CFTC complaint, received around $1 million from her husband. A related forex scam where the company, Capital Blu Management used the money for luxury cars, strip clubs and a private jet can be found here.
As in most Ponzi schemes of this sort, once the customers begin to ask for their money back, the game inevitably ends. By 2009, CMA Capital Management began having problems paying its clients their monthly returns.
CMA Capital Management investors’ money ran out eventually since the funds had already been misappropriated by the Aliagas. Even paying just the 2% to 3% monthly returns to the scheme’s clients was no longer feasible to cover up the scheme, prompting its collapse.
CMA’s Assets Were Frozen
In their case, the CFTC is seeking restitution, civil monetary penalties, disgorgement of ill-gotten gains, bans on trading and registration for the defendants. They have also asked for a permanent injunction to prevent further violations of federal commodities law by the defendants.
On April 9th, 2010, the Hon. Marcia G. Cooke of U.S. District Court for the Southern District of Florida entered an order freezing the assets of both defendants and relief defendants.
The order also prohibited the destruction of all pertinent books and records and required a complete accounting of all assets. A hearing was set for May 5th, 2010 on a preliminary injunction.
Has anything happened in the past two years on this case?
The CFTC has continued to push forward on this case to gain restitution and civil monetary penalties for $5.5 million for the misappropriation of investor funds in this blatant modern-day Ponzi scheme. According to the agency’s press release on September 26, 2012, Judge Marcia G. Cooke of the U.S. District Court for the Southern District of Florida “entered a consent order of permanent injunction against defendants. Specifically, the order requires the defendants to jointly pay restitution of $1.1 million, Aliaga to pay a civil monetary penalty of $3.3 million, and CMA to pay a civil monetary penalty of $1.1 million. The order also imposes permanent trading and registration bans against the defendants.”
Conclusion – Another Ponzi Scheme Unravels
The case of CMA Capital Management appears to be a classic forex Ponzi scheme and managed accounts fraud.
As with most of these types of cases, the funds were solicited by the perpetrators who touted the virtually unbelievable trading abilities of the fraudster and promised far above average returns. Furthermore, the fraud continued over a period of time as victims were paid a small percentage of their principal in the guise of a monthly return on their investment.
Of course, the reality of the situation remains that virtually the entire amount of their invested principal has been stolen. With most of the funds cleaned out of the customer accounts, payments become harder to continue making, and the Ponzi scheme ultimately began to unravel.
Interestingly, what most CMA Capital Management clients may not have been aware of when they opened their accounts was the fact that the company was unregulated and not registered with the CFTC. This fact alone should have raised some big red forex fraud flags for potential investors.
Read the following stories to learn more about what to look out for when it comes to managed accounts: