The Commodity Futures Trading Commission (CFTC) last Friday filed a complaint against FX Latino Inc. (FXL), Ramon Salvador Delgado-Gomez (Gomez), FXL Investment PR LLC, JRH Services Inc., Walmy Rivera-Santiago, Infinity Investment and Construction Management Corp., and Hector Javier Santos-Pagan (collectively, Defendants), in the U.S. District Court for the District of Puerto Rico. The Defendants allegedly launched advertisements on social media platforms such as Instagram and promoted public seminar and investor coaching campaigns to entice more than two thousand investors to invest at least $27 million. To attract investors, Defendants promised to generate profits through their successful foreign currency (“forex”) trading platform. Similar to any number of “get-rich-quick” schemes promising exceptional returns while, in fact, perpetuating financial fraud, Defendants never actually engaged in trading or generated any profits.
The complaint alleges that FXL and Gomez misappropriated at least $13 million, distributing the funds that new investors contributed as investments to individuals who had invested at an earlier point in time and describing the misappropriated customer funds as “profits.” Similar to other scoundrels who perpetuate such schemes, Defendants also allegedly misappropriated investors’ money to fund their own lavish lifestyle.[1] This age-old sleight of hand gained its contemporary moniker “Ponzi scheme” from the 1920’s financial fraud perpetuated by Charles Ponzi.[2] For proof of the enduring and pernicious legacy of fraudsters such as Ponzi and his predecessors, recall the revelation of Bernie Madoff’s $50 billion Ponzi scheme.[3] Prosecutors continue to work today – a decade after Madoff confessed that his investment advisory fund was “all just one big lie” – to compensate victims.[4]
Defendants in such fraud actions often target vulnerable individuals within a specific community based on their shared faith, heritage, culture, or native language.[5] Affinity-based fraud schemes all-too-often seek to exploit the trust generated within a community. Perpetrators target the identified communities because they are familiar with the fears and challenges that may deter investors from reporting or effectively communicating the details of the fraud to law enforcement or regulatory authorities.
In this case, the allegations suggest that Defendants targeted Spanish-speaking individuals in the Puerto Rican community. As earlier enforcement actions illustrate, the predatory behavior that incentivizes this type of fraud is all too common.[6]
The CFTC is continuously engaged in pursuing these alarming frauds, which often prey on communities that are already vulnerable due to exclusion from more established market structures due to cultural or educational differences or limited financial resources. Gomez held himself out to the public as a professional forex trader, and utilized social media handles that emphasized his Latino heritage and purported position as a leader of the forex industry in Puerto Rico. At various times, Gomez conducted public forex trading seminars in Puerto Rico and the continental United States on forex trading for a company that marketed itself as an academy for teaching Spanish-speaking people how to trade forex. The Commodity Exchange Act and the CFTC’s regulations include anti-fraud and disclosure provisions that seek to prevent such misconduct. Indeed, the CFTC has issued customer advisories warning against forex investment schemes on social media,[7] especially by unregistered entities and individuals. I strongly encourage all members of the public to stay informed about the potential scams and abuses in forex assets markets by visiting our investor advisory page.[8]
I applaud the efforts of the CFTC’s Division of Enforcement and would like to recognize the staff bringing this litigation: Erica Bodin, Kara Mucha, Brian Hunt, Alan Edelman, Aimée Latimer-Zayets, and Rick Glaser.
[1] See, e.g., Compl. CFTC v. Yang, No. 2:22-cv-00449 (E.D. Wisc. Apr. 13, 2022), ECF No. 1 (initiating an action against defendants who defrauded members of the Hmong community in Wisconsin). In Yang, the CFTC alleged that the defendants fraudulently solicited millions of dollars of investors’ funds for the purported purpose of trading forex. The defendants held themselves out as successful traders with consistently high returns. While defendants in Yang in fact did engage in trading (as opposed to defendants here), their trading was not profitable. Moreover, defendants concealed the fact that they misappropriated millions of dollars from investors for their own personal use. Id.; see also CFTC Release No. 8513–22, CFTC Charges Wisconsin Woman and Her Companies with Fraud and Misappropriation, Apr. 13, 2022, https://www.cftc.gov/PressRoom/PressReleases/8513-22.
[2] In addition to careful academic scholarship and investigative journalism revealing the impact of Charles Ponzi’s scheme, popular television and film continue reference Ponzi’s scheme. For example, one finds colorful explanations of Ponzi’s scheme and descriptions of investors who suffered losses as a result of the scheme in Comedy Central, Drunk History, “Scoundrels,” Downton Abbey; and Boardwalk Empire.
[3] Diana Henriques, The Wizard of Lies: Bernie Madoff and the Death of Trust (2011).
[4] See U.S. Dep’t Just., Justice Department Announces Total Distribution of Over $4 Billion to Victims of Madoff Ponzi Scheme, Sept. 28, 2022, https://www.justice.gov/opa/pr/justice-department-announces-total-distribution-over-4-billion-victims-madoff-ponzi-scheme.
[5] Madoff’s scheme also appears to have targeted certain investors and charitable funds. See, e.g., Stephanie Storm, Elie Wiesel Levels Scorn at Madoff, N.Y. Times, Feb. 26, 2009 (“Mr. Wiesel’s charity lost $15.2 million, and he and his wife, Marion, lost their life savings. . . . This was a personal tragedy where we discovered all of a sudden what we had done in 40 years—my books, my lectures, everything was gone.”).
[6] See, e.g., CFTC v. Safety Capital Mgmt., Inc., No. 15-CV-5551 (RJD) (PK) (E.D.N.Y. Aug. 31, 2022), ECF No. 62 (describing a CFTC settlement with Tae Hung Kang for fraud targeting the Korean-speaking community in Queens, New York); see also CFTC v. Yang, supra n.1 (bringing an action against Kay Yang for fraud targeting the Hmong-speaking community in Wisconsin); CFTC Release No. 8583-22, Federal Court Orders New York Man to Pay Over $800,000 for Commodity Pool Fraud, Sept. 8, 2022, https://www.cftc.gov/PressRoom/PressReleases/8583-22; CFTC Release No. 8513-22, CFTC Charges Wisconsin Woman and Her Companies with Fraud and Misappropriation, Apr. 13, 2022, https://www.cftc.gov/PressRoom/PressReleases/8513-22; CFTC Release No. 7245-15, CFTC Charges New York Corporations Safety Capital Management, Inc. and GNS Capital, Inc., both d/b/a FOREXNPOWER, and New York City Residents John Won, Sungmi Kang, and Tae Hung (“Kevin”) Kang with Fraudulently Soliciting More than $1.5 Million in a Forex Fraud Scheme, Sept. 25, 2015, https://www.cftc.gov/PressRoom/PressReleases/7245-15.
[7] See CFTC, Investor Resilience—World Investor Week 2022: Investor Bulletin, Oct. 3, 2022, at 5 (“Do not invest money based on advice from someone you have solely met online or through an app.”), https://www.cftc.gov/node/242421.
[8] CFTC, Advisories & Articles, https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/index.htm.
