U.S. forex and futures regulator, the Commodity Futures Trading Commission (CFTC), has filed a civil enforcement action in the U.S. District Court for the Southern District of New York, charging Brett G. Hartshorn of Sarasota, Florida, with fraudulently soliciting and/or managing at least $906,000 from retail clients to invest in off-exchange forex transaction.
Mr. Hartshorn misappropriated at least $57,414 of client funds for his own personal benefit, failed to register with the CFTC as a Commodity Trading Advisor (CTA), and failed to produce books and records to the CFTC.
The CFTC Complaint alleges that, from at least June 18, 2008 to in or around 2014, Hartshorn fraudulently solicited at least 13 retail clients to invest in off-exchange forex on a leveraged, margined, or financed basis and to give Hartshorn discretionary authority to trade forex on their behalf. Hartshorn typically met his victims at church or socially in his local community, according to the Complaint. As alleged, Hartshorn told most clients that 1) he had profitably traded forex on behalf of himself and others, 2) clients could expect substantial profits if they permitted him to trade forex on their behalf, and 3) he would limit the risk of loss to client funds.
However, according to the Complaint, these statements to clients were false because Hartshorn employed risky trading strategies and failed to disclose his pattern and history of losses – often large single-day losses – trading on behalf of clients. Furthermore, as alleged, Hartshorn did not disclose to clients that under his so-called “profit” sharing arrangement, he could be (and often was) compensated, even as client trading losses accumulated.
In addition, Hartshorn allegedly misappropriated client funds for his own personal benefit, while failing to disclose his misappropriation to clients. Hartshorn also acted as a CTA without registering as such with the CFTC, in violation of the Commodity Exchange Act and CFTC Regulations, and he failed to produce books and records in response to CFTC subpoenas that he was required to maintain as a CTA, according to the Complaint.
In its continuing litigation against Hartshorn, the CFTC seeks, among other relief, restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent trading and registration bans, and a permanent injunction against further violations of federal commodities laws, as charged.
The full CFTC complaint against Mr. Hartshorn can be seen here.