CFTC charges several companies and individuals for defrauding investors and a church

The US-based Commodity Futures Trading Commission announced filing charges against several companies and individuals.

Silver Star FX, LLC (SSL), Silver Star Live Software LLC (SSLS ) and David Wayne Mayer were charged with sales solicitation fraud and failing to register with the CFTC. The US watchdog alleged that between July 2018 to March 2019 SSL, SSLS and David Mayer solicited customers to open trading accounts and offered to trade through a fully automated forex trading software system that Mayer created. Under pseudonym “Quicksilver”, Mayer as unregistered associated person and solicited clients through videos posted online, on social media and at marketing events. He also distributed material misrepresentations and omissions regarding his qualifications and trading experience.

Additionally, CFTC’s complaint also alleges that the defendants misrepresented the forex trading system’s performance history and the expected trading profits. They also failed to disclose that Mayer never opened a live trading account using the forex trading system.

In a previous, related case, the Commission found that SSL and SSLS acted as unregistered commodity trading advisors and that two former officers acted as unregistered associated persons of both SSL and SSLS.

Brett G. Hartshorn was charged for fraudulently soliciting people to trade off-exchange forex derivatives and misappropriated funds of at least two of those clients.  The CFTC order requires that he pay restitution of $890,000 and imposes permanent trading and registration bans. The US Commission discovered – and Hartshorn admitted – that from June 2008 to in or around 2014 fraudulently solicited at least 13 people, including members of his church, as well as individuals in the local community, to trade off-exchange forex.

Hartshorn told most of his clients that he had traded forex profitably on behalf of himself and others, that his clients could expect substantial profits if they permitted him to trade forex on their behalf so that he would limit the risk of loss. While in reality, Hartshorn repeatedly used risky trading strategies and suffered significant trading losses on behalf of his clients.

Hartshorn failed to disclose to clients that under his so-called “profit” sharing agreement, he was compensated even as his clients lost money trading. He also misappropriated the funds of at least two clients and failed to disclose that to them.

The Commission also found that Hartshorn failed to register as a commodity trading advisor (CTA) and that he violated various CTA requirements such as failing to produce documents to the CFTC that he was required to maintain.

In a parallel criminal action pending in the U.S. District Court for the Middle District of Florida, Hartshorn pleaded guilty to making false statements to the FBI regarding his misappropriation of client funds.


CFTC penalty

The CFTC also filed civil enforcement action against Erik J. Hass and his company Simply Gains Inc. on charges of fraud, misappropriation and failing to register with the CFTC.

The defendants solicited at least $2.1 million from at least 21 individuals to fund their forex commodity pool operation. Despite assurances that they could not lose more than 20% of their funds, the defendants lost more than $1 million trading forex and misappropriated at least $415,000 more to spend on Hass’s mortgage, credit card debt and a Caribbean cruise.

The CFTC also alleges that the defendants solicited pool participants with deception about Hass’s experience, expertise and track record while promising future profitability. The complaint further claims that they concealed their misappropriation and unprofitable forex trading by sending pool participants false account statements to show profits.

CFTC is seeking restitution to defrauded individuals, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans and a permanent injunction against future violations of the Commodity Exchange Act.

On 9 June 2020, the United States Attorney for the District of Oregon indicted Hass on five counts of wire fraud, two counts of mail fraud and one count of money laundering.

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