The US Commodity Futures Trading Commission (CFTC) has obtained a federal consent order for permanent injunction against CFTC defendant Jeffrey L Groendyke (doing business as JG Forex Fund) of Middleville, Michigan, requiring him to pay USD963,141 in restitution and a USD420,000 civil monetary penalty. The order also permanently bars Groendyke from engaging in any commodity-related activity, including trading and registering with the CFTC.
The order settles a CFTC anti-fraud enforcement action filed in May 2011, charging Groendyke with fraud and misappropriation in connection with a Ponzi scheme involving off-exchange foreign currency trading (forex).
The order, entered by Judge Robert J Jonker of the US District Court for the Western District of Michigan, finds that Groendyke fraudulently solicited and accepted USD1,009,844 from 42 individuals for the purpose of investing in a pool to trade forex. The consent order also finds that Groendyke failed to register with the CFTC as a commodity pool operator, as required by law.
Of the amount solicited and accepted, Groendyke used only USD366,950 to trade forex, of which USD324,228 was lost trading, the order finds. Of the remaining USD685,615, he used USD46,703 to pay purported forex trading profits to existing pool participants in the manner of a Ponzi scheme, lost USD5,503 trading commodity futures for his own account, and sent USD501,510 to third parties who used the funds for purposes other than forex trading, the order finds.
In addition, the order finds that Groendyke spent USD131,899 on personal expenses such as computer equipment, rent, groceries, restaurants, hotels, and retail store merchandise. Groendyke did not disclose to participants that he would use their funds for any purpose other than trading forex, according to the order.
