Not-so-bulletproof vest! CFTC opens fire on FX fraud scheme

The U.S. Commodity Futures Trading Commission (CFTC) yesterday announced that on August 15, 2014, Chief Judge Marcia S. Krieger, of the U.S. District Court for the District of Colorado, issued a restraining Order freezing the assets of Defendants Ryan Tomazin of Stamford, Connecticut, Ryan Madigan of Raleigh, North Carolina, and Randell A. Vest of Fort Myers, Florida.

The restraining Order was an expansion of the court’s August 7, 2014 restraining Order, which froze the assets of Mssrs Tomazin’s, Madigan’s and Vest’s holding companies, Defendants RAST Investor Group, LLC, Madigan Enterprises, Inc., and the rather ominously named Bulletproof Vest, Inc., respectively, and their Colorado company, Defendant R2 Capital Group LLC (R2 Capital). The restraining Orders also prohibit the Defendants from destroying or altering books and records.

According to the CFTC, defendants allegedly solicited more than $2.4 million from at least four participants in commodity investment pool and the Federal court has issued restraining orders freezing Defendants’ assets and protecting books and records.

Both restraining Orders arise from a CFTC federal court enforcement action filed on August 6, 2014, charging the Defendants with futures and FX fraud, and misappropriation. The CFTC Complaint also charges the Defendants with illegally commingling funds received from pool participants with others’ funds by, among other things, transferring pool participant funds directly into the personal bank accounts of Tomazin, Madigan, Vest, their respective holding companies, and R2 Capital.

The Complaint alleges that since at least December 2009 through the present, R2 Capital, which is owned and operated by Mssrs Tomazin, Madigan, and Vest, and their respective holding companies, solicited more than $2.4 million from at least four pool participants who invested in an investment pool operated by R2 Capital: R2 Commercial Capital Partners I L.P. (the Commercial Pool). The Commercial Pool traded FX and, later, futures contracts, including E-mini S&P 500 futures contracts and E-mini Dow futures contracts, according to the Complaint.

The Complaint alleges that Defendants falsely and fraudulently concealed from at least two pool participants that these defendants had closed the FX account, that pool participants’ funds had been transferred to a new account at a different Futures Commission Merchant, that the Commercial Pool was no longer trading FX, and that the Commercial Pool was now trading E-mini S&P 500 futures and securities products.

In addition, the Defendants allegedly misappropriated more than $1.2 million of pool funds by routinely illegally diverting substantial sums from the R2 Capital and Commercial Pool bank accounts to themselves and their Defendant holding companies until all but a few hundred dollars of the pool participant funds were dissipated. Defendants allegedly then spent these misappropriated funds on personal trips, private school tuition for their children, other investments, and miscellaneous personal expenses.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws, as charged.

For the full CFTC release, click here.

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