The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Eastern District of New York against Defendants Daniel Winston LaMarco and his company, GDLogix Inc., charging them with off-exchange foreign currency derivatives (forex) fraud, commodity pool fraud, and failure to register with the CFTC, as required. LaMarco previously resided in Huntington, New York, and GDLogix’s last known principal place of business was in Huntington, New York. Neither Defendant has ever been registered with the CFTC.
LaMarco Fraudulently Solicited and Accepted Nearly $1.5 Million from Individuals
According to the CFTC’s Complaint filed on July 10, 2017, from January 2011 through March 2016, LaMarco fraudulently solicited and accepted $1,492,650 from 13 individuals to trade off-exchange leveraged or margined retail derivatives forex contracts in a commodity pool operated by the Defendants. LaMarco solicited pool participants by word-of-mouth, by email, by the Internet, by the use of mails, and/or other means, according to the Complaint. Further, as alleged, LaMarco solicited pool participants by falsely representing to them the purported success of his personal investments in forex trading and the purported safety of his forex investment strategy. All of these representations were material and false, the Complaint alleges.
While the majority of the pool participants were friends and acquaintances of LaMarco located in and around Suffolk County, New York, other pool participants lived in Connecticut, Massachusetts, and Ohio, according to the Complaint.
To conceal and perpetuate his fraud, beginning on or about February 2011, according to the Complaint, LaMarco emailed participants fabricated monthly statements purported to provide the pool’s profits, losses, and net balances of each participant. However, according to the Complaint, all of the information in the monthly statements was false. LaMarco also allegedly misappropriated pool funds, which he spent on personal expenses or lost in unprofitable trading in his personal accounts. In February 2016, the monthly statements falsely represented to pool participants the total value of the commodity pool had increased to $1,797,126. In reality, however, LaMarco had lost nearly all of pool participants’ funds through unsuccessful trading and by diverting $630,050 of the total principal invested to some participants as purported “profits” in the nature of a “Ponzi” scheme, as alleged.
Related Criminal Action
In a related criminal action involving the same conduct at issue in the CFTC’s case, LaMarco earlier pleaded guilty to one count of commodities fraud and one count of wire fraud in U.S. v. LaMarco, No. 2:16-cr-00433 (E.D.N.Y.). On February 3, 2017, LaMarco was sentenced to 42 months in prison and ordered to pay $872,600 in criminal restitution.
CFTC Enforcement Director Comments
James McDonald, Director of CFTC’s Division of Enforcement, stated: “This case is another example of a fraudulent investment scheme based on personal relationships. LaMarco targeted those with whom he made connections through his local community. Through our cooperative enforcement efforts, we can combine our available remedies with those of our law enforcement partners to achieve maximum deterrence and protection for customers and the markets. In appropriate cases like this one, the U.S. Department of Justice can seek a term of imprisonment, while we seek to ensure wrongdoers never return to the markets we regulate.”
In its continuing litigation, the CFTC seeks full restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.
The CFTC thanks the U.S. Attorney’s Office for the Eastern District of New York for its assistance.
CFTC Division of Enforcement staff members responsible for this action are Danielle Karst, Timothy J. Mulreany, Michael Amakor, Anthony Homer, and Paul G. Hayeck.
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CFTC’s Forex Fraud and Commodity Pool Fraud Advisories
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.
The CFTC has also issued a Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaintonline.
- RELATED LINKS
- Complaint: Daniel Winston LaMarco and GDLogix Inc.
