Aggregated News From Investment Management Regulators

Federal Court Orders California Forex Firm and Its Owners to Pay Over $4 Million for Pool Fraud and Registration Violations

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— The Commodity Futures Trading Commission today announced that the U.S. District Court for the Northern District of California entered a consent order for permanent injunction, monetary sanctions, and equitable relief against defendants Travis Capson of Kanab, Utah, Arnab Sarkar of El Cerrito, California, and their California company Denari Capital, LLC (Denari) to resolve a CFTC action filed on November 5, 2019. [See CFTC Press Release No. 8073-19].

The order finds all three defendants liable for engaging in a foreign exchange (forex) pool fraud and failing to register with the CFTC as a commodity pool operator and associated persons as required. The order also finds Capson liable for making misrepresentations regarding Denari’s activities to the National Futures Association (NFA).     

The order requires Capson and Sarkar to pay civil monetary penalties of $250,000 and $166,000, respectively. In addition, they and their company, Denari, are required to pay restitution of $3,663,282 to victims of their scheme. The order also imposes a permanent injunction prohibiting the defendants from further violations of the Commodity Exchange Act and CFTC regulations, as charged, permanent registration bans, and five-year trading bans.

Case Background

The order finds that from at least August 2012 to December 2019, the defendants fraudulently solicited participants to invest with Denari, misrepresenting the past profitability of Denari’s forex trading. The order also finds the defendants issued false account statements to participants that misrepresented the profitability of their respective interests in the pool; failed to receive pool funds in the pool’s name; improperly commingled pool funds; and failed to provide required commodity pool disclosures. Further, the order finds the defendants failed to register with the CFTC as required. The order also finds that Capson made false representations to NFA during an examination conducted on July 15, 2019, when he told NFA representatives that Denari had been trading forex with proprietary funds since 2015, and that Denari did not trade forex for third parties until 2019.

The order appoints Kathy Bazoian Phelps as Permanent Receiver for Denari, to collect and distribute restitution. Phelps has collected and distributed more than $700,000 of funds and more than $2.5 million of securities to satisfy allowed participant claims. However, the CFTC continues to caution victims that restitution orders may not always result in the recovery of money lost, because wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure wrongdoers are held accountable.

The CFTC thanks NFA for its assistance.

Division of Enforcement staff members responsible for this action are Carlin Metzger, Joy McCormack, Matthew Edelstein, Joseph Konizeski, Scott Williamson and Robert Howell.

* * * * * *

CFTC’s Forex Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which alerts customers to forex fraud and lists simple ways to spot forex scams.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA. 

This news item was originally published by the Commodity Futures Trading Commission (CFTC US). For more information, see the Source Link.

Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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