Aggregated News From Investment Management Regulators

Federal Court Orders Trading Advisor to Pay $890,000 for Defrauding Church and Community Members in Forex Scheme

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Washington, D.C. — The Commodity Futures Trading Commission today announced that the U.S. District Court for the Southern District of New York entered a consent order for permanent injunction and other equitable relief against defendant Brett G. Hartshorn of Sarasota, Florida, finding, among other things, that he fraudulently solicited at least 13 individuals to trade off-exchange foreign currency derivatives (“forex”) and misappropriated funds of at least two of those clients.  The order requires that he pay restitution of $890,000 and imposes permanent trading and registration bans.

The order finds—and Hartshorn admits—that from at least June 18, 2008 to in or around 2014, Hartshorn fraudulently solicited at least 13 individuals, including members of his church, as well as individuals in the local community, to trade off-exchange forex.  According to the order, Hartshorn falsely told most, if not all, 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, and that he would limit the risk of loss. In reality, Hartshorn repeatedly employed risky trading strategies and suffered significant trading losses—often creating devastating single-day losses—on behalf of his clients.

The order finds that Hartshorn failed to disclose to clients that under his so-called “profit” sharing agreement with clients, he could be, and often was, compensated even as his clients lost money trading. The order also finds that Hartshorn misappropriated the funds of at least two clients and failed to disclose that misappropriation to his other clients.

The order further finds that Hartshorn failed to register as a commodity trading advisor (CTA) as required under the Commodity Exchange Act and CFTC regulations and that he violated various CTA requirements, including failing to produce certain documents to the CFTC that he was required to maintain. This order resolves the CFTC’s case against Hartshorn that was filed in the Southern District of New York in 2016. [See CFTC Press Release No. 7506-16]

Related Criminal Action

In a parallel criminal action pending in the U.S. District Court for the Middle District of Florida, Hartshorn pleaded guilty to willfully making false statements to the FBI relating to his misappropriation of client funds [See United States v. Brett G. Hartshorn, Case No. 8:20-cr-00022-CEH-SPF, ECF No. 3 (M.D. Fla)].

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Middle District of Florida, the FBI, and the UK Financial Conduct Authority, in this matter.

The Division of Enforcement staff members responsible for this case are Linda Y. Peng, Christopher Giglio, R. Stephen Painter, Jr., David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.

* * * * * * *

CFTC’s Foreign Currency (Forex) Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency (Forex) Trading Fraud Advisory, to help customers identify these scams.

The CFTC also strongly urges the public to verify a company’s registration with the Commission before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.

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) or file a tip or complaint online.

Regulator Information

Abbreviation: CFTC
Jurisdiction: USA
Email: [email protected]

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