The US Commodity Futures Trading Commission (CFTC) has obtained federal court consent orders resolving its remaining claims against defendants Robert D Watson and Daniel J Petroski, both of Houston, Texas, PrivateFX Global One Ltd, SA, and 36 Holdings Ltd. Global One, a corporation formed in Panama, and 36 Holdings are under the control of a court-appointed receiver, Thomas L Taylor III.
The consent orders, both entered on February 2, 2012, by the US District Court for the Southern District of Texas, stem from a CFTC complaint filed in the same court on 21 May, 2009, charging the defendants with operating a multi-million dollar fraudulent off-exchange foreign currency (forex) scheme (see CFTC Press Release 5661-09, 26 May, 2009).
One consent order requires Watson, Global One, and 36 Holdings jointly and severally to pay USD21 million in disgorgement and orders Watson to pay a USD10 million civil monetary penalty. The other consent order requires Petroski to pay USD414,723 in disgorgement and a USD140,000 civil monetary penalty. The consent orders also require the defendants to give up their rights to funds and other assets held by the receiver.
The court previously entered a consent order of permanent injunction on 24 February, 2010, that resolved liability against all defendants and permanently barred the defendants from engaging in any commodity-related activity and from registering with the CFTC. This earlier order found that on or about July 1, 2006, defendants began soliciting investors to purchase shares of Global One, whose purported objective was to speculate in the forex markets.
Global One’s offering raised approximately USD21 million from at least 80 investors by touting Global One’s purportedly successful forex trading performance, according to the order. From April 2006 through April 2009, the defendants reported monthly returns, purportedly generated through forex trading, to Global One investors of approximately 1.5 per cent to nearly 3 per cent and claimed to never have had a losing month trading forex, the court found. However, also according to the order, the defendants’ representations to Global One investors regarding Global One’s extraordinary forex trading profits and related returns to investors were false.
The earlier consent order also found that, prior to the filing of the CFTC’s complaint, the defendants provided the CFTC with fictitious third-party bank and forex trading records prepared by Watson to conceal the fraud.
In a related criminal matter, filed in the U.S. District Court for the Southern District of Texas as part of President Barack Obama’s Financial Fraud Enforcement Task Force, Watson pleaded guilty to one count of securities fraud. On 10 February, 2012, the court sentenced Watson to the statutory maximum of 20 years in prison.
