David A. Smith’s Forex Fraud Fame – Has Been Sentenced to 30 Years

Chris Lee

The CFTC has done a yeoman’s task in cleaning up the industry from unscrupulous brokers over the years and educating consumers on the arts of the con man. Closing down the bad guys or assessing large fines on firms like FXCM for “slippage” abuse is one thing. Putting pooled account managers behind bars takes more time and effort, but eventually the crooks are made to pay, even when they operate outside of the United States.

David A. Smith, a citizen of Jamaica, will go down in history as one of these cross-border criminals that deceived investors with high-return promises in currency trading to the tune of $220 million. He lived the high life in Windermere, Florida, and bandied about precious gemstones, precious metals and jewelry as if they were modest toys of the wealthy. In the process, over 6,000 investors were fleeced before they became aware that their high returns were actually fictitious trading activities.

Prosecutors have pieced together that Smith, in 2005, set up a Jamaican firm known as Overseas Locket International Corp. (OLINT). He quickly expanded his scope of operations to the Turks and Caicos Islands, a playground for the rich and prosperous, by forming another firm known as OLINT TCI Corp. Ltd. Like the true Ponzi schemer that he was, he attracted investors with promises of 10% monthly returns from forex trading (read more about the risk of unrealistic returns). He created an elaborate infrastructure to impress prospective clients, but there was no evidence that he ever did engage in active currency trading.

A number of shell corporations were also formed to facilitate moving funds to the United States to finance his extravagant lifestyle. Some of these “sister” companies did have access to the foreign exchange market, but what little trading was done was carried at a loss. As is the rule in these operations, account reports were falsified to deceive investors. Contributions to both political parties in Jamaica also provided cover, but his firms were described as “private investment clubs”, one trick used to avoid local regulation.

Mr. Smith’s con game also falls in to the category of “affinity” fraud. Successful word-of-mouth campaigns spread the news far and wide within Jamaican communities outside of their homeland. Jamaicans delivered deposits from the USA, Canada, and the UK, among other countries. When the “Great Recession” hit and investors began requesting withdrawals, charges of money laundering, wire fraud, and conspiracy started to surface. Smith was apprehended and arrested in late 2008 in the Turks and Caicos, and then later brought to trial in the United States in 2010.

Smith actually carried out his conspiracy while in Seminole County, Florida, where he ultimately attempted to channel money into a local bank. In late 2011, David Smith received a 30-year jail sentence. He will serve the first six and a half years in the Turks and Caicos and the balance in a United States prison. There are also un-named co-conspirators that will be indicted for acting as “intermediaries that would become known as feeder clubs and ‘pigs’.”

The lesson is clear – Be wary of promises of exorbitant returns, whether from the fund manager or from his loyal cohorts or duped clients.

For further reading:
Learn the fantastic story about Bernard Madoff’s Ponzi scheme.

Learn more about HYIP programs and Ponzi schemes.

Read about the biggest forex scam ever.

Read our most extensive and general article overall on forex fraud.


Chris Lee

Latest news

Cybercrime still on the rise – be wary of potential scams
While our attention may be drawn to the latest news regarding the COVID-19 pandemic or the Tokyo Olympic Games, cybercrime statistics continue to grow unabated in the shadows. Read more
How to Learn to Trade Unpredictable Summer Markets
Recent events in the financial markets have left traders and investors dazed and confused. Read more

Safest Forest Brokers 2020

Broker Info Best In Customer Satisfaction Score
#1 ForexTime LogoYour capital is at risk Founded: 2011 Global CFD & FX Broker
Number One Broker
BEST FOREX BROKER Visit broker
5
#2 ForexTB logoYour capital is at risk Founded: 2015 Global Forex & CFD Broker
Number One Broker
LOWEST FEES Visit broker
4.9
#3 Tickmill forex broker logoYour capital is at risk Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#4 BlackBull MarketsYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#5 Forex Broker Pepperstone LogoCFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9

    Forex Fraud Certified Brokers

    HYCM Logo
    IC Markets Logo
    Exness Small Logo
    FXTM Logo
    XM Logo
    LegacyFX Small Logo
    Vantage FX logo
    Plus500 Small Logo
    Pepperstone
    AvaTrade logo
    skilling logo
    Forex.com Logo
    IQ Option Logo
    OctaFX Logo
    BlackBull Markets Logo
    City Index Logo