Forex fraud thwarted by CFTC resulting in $819,000 fine

The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order requiring Respondents Christopher A. Engel and Pinnacle Forex Group LLC (Pinnacle), both of Glen Rock, Pennsylvania, jointly to pay a $414,000 civil monetary penalty and restitution totaling $405,378 to defrauded customers for committing fraud and misappropriation in connection with operating a commodity pool that traded leveraged or margined off-exchange FX contracts.

The Order also requires Engel and Pinnacle to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and permanently bans them from registering, trading, and engaging in other CFTC-regulated activities. Mr Engel owned and operated Pinnacle, and neither Mr Engel nor Pinnacle has ever been registered with the CFTC.

Specifically, according to the Order, from approximately June 2011 to October 2012, Mr Engel falsely told prospective pool participants that Pinnacle managed client accounts worth tens of millions of dollars and that Pinnacle was registered with the CFTC.

Also, the respondents solicited and obtained approximately $414,000 from at least 21 pool participants to participate in a commodity pool to trade leveraged or margined off-exchange forex. However, according to the Order, Mr. Engel only deposited approximately $137,000 into forex trading accounts, which he later withdrew and misappropriated.

Mr. Engel fabricated profits and commissions in statements and emails sent to pool participants to conceal his misappropriation of their funds. Engel used the misappropriated funds to purchase automobiles, a natural foods store, and other personal items, the Order finds. The total loss to pool participants was approximately $405,378, according to the Order.

Additionally, the Order finds that between approximately July 2011 and October 2012, Engel and Pinnacle illegally operated as a Commodity Pool Operator without being registered as such with the CFTC.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC has categorically stated that it intends to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable, a matter covered in yesterday’s LeapRate editorial regarding the fortitude and prioritized consumer protection policies of North American financial services regulators.

For the official CFTC announcement, click here.

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