A foreign exchange trader from near the US city of Chicago has been charged with fraud after it was alleged that he misappropriated investor funds.
Dro Kholamian, who was described by the Commodity Futures Trading Commission (CFTC) as “a long-time commodity trader and former floor broker”, comes from the city of Barrington in Illinois just 30 or so miles from Chicago.
He allegedly told clients that he would provide on-the-margins foreign exchange and commodity futures contracts trading services on their behalf.
However, Kholamian, whose firm was called Blue Star Trading LLC, is accused of failing to do so. The complaint lodged by the CFTC says that Kholamian began to take investments as early as January 2013.
Up to the present date, he took a minimum of $775,000 from three, or possibly more, individual investors. He met these investors through connections with a local Armenian community.
It is believed that in total he may have accrued over $1.9 million from the group, although at present the amount is unknown.
Upon taking these investments from his clients, he would allegedly tell them that there would be a profit of between 10 and 20% raised each year provided the deposit was $25,000.
Additionally, he is accused of telling investors that they could take the cash out whenever they required without facing a financial penalty. He would later allegedly inform them that the investments were reaching the cash targets they were supposed to be.
“After his clients opened and funded their trading accounts, Kholamian assured them that their investments were “doing well” and were on target to make the projected 20 percent return after one year”, alleges the CFTC.
“In fact, Kholamian did not trade on their behalf as promised.”
In reality, he allegedly spent the cash on other items, such as medical bills. He is accused of, on some occasions, paying out cash from previous investors to create the illusion of returns, in the same way as a Ponzi scheme.
According to the CFTC, his behaviour then got worse and he began lying and avoiding his clients.
“As part of his scheme, when clients demanded to withdraw their funds, Kholamian ignored their demands and lied about trading conditions that purportedly prevented him from making disbursements, claiming, for instance that he was ‘tied up in trades’”, the CFTC claims.
“Eventually, when confronted with persistent demands from clients for the return of their money, Kholamian issued two $25,000 checks from his Blue Star bank account to clients, knowing that they could not be paid due to insufficient funds.”
Now, the CFTC is looking to regain all of the cash which was lost over the course of the alleged fraud, as well as secure bans on Kholamian trading in the future.
“In its continuing litigation against the Defendants, the CFTC seeks full restitution to defrauded clients, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC Regulations, as charged”, the statement said.