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Safeguard 3030 Investment Club to pay more than USD3m over forex Ponzi scheme

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A federal court in Virginia has entered a final default judgment and permanent injunction against Ronald W Smith, Jr of Vansant, Virginia, doing business as Safeguard 3030 Investment Club (Safeguard).

The court’s order, entered on 16 April, 2012, by Judge James P Jones of the US District Court for the Western District of Virginia, requires Smith to pay a USD2,008,251 civil monetary penalty and restitution of USD1,064,923. The order imposes permanent trading and registration bans against Smith.

The order also requires the two relief defendants, Angela A. Duty Smith, Smith’s wife, and Tigre Systems, Inc., to disgorge ill-gotten gains that they received from Smith totalling USD188,842 and USD1,242, respectively.
The order stems from a CFTC enforcement action charging Smith with operating an off-exchange foreign currency (forex) Ponzi scheme and misappropriating customer funds (see CFTC Press Release 5784-10, 26 February, 2010).

The order finds that, from at least January 2009 through February 2010, Smith, doing business as Safeguard, fraudulently solicited approximately USD1.4 million from 74 individuals to trade off-exchange forex contracts. Smith solicited customers through a website and a web-posted video, claiming to be an experienced and successful forex trader. Smith also lured prospective customers with the prospect of earning a 30 percent return every 30 business days. To conceal his fraud, Smith provided customers with false account statements showing profitable trading, according to the order.

Moreover, the order finds that Smith did not deposit any customer funds into an actual forex trading account or use customer funds to trade forex contracts. Instead, Smith misappropriated all of the $1.4 million provided by customers to invest on their behalf, the order finds. Smith used misappropriated funds to pay earlier customers in a Ponzi-style scheme, to fund Tigre’s operations, and to pay personal expenses, including three Dodge automobiles, a pool and pool house, home furnishings, and multiple visits to the luxury Martha Washington Inn, the order finds.

In related criminal actions, on 7 December, 2010, the US Attorney’s Office for the Western District of Virginia indicted Smith, his wife, and Terrance K Cunningham for multiple counts of wire fraud and money laundering, among other charges. On 30 June, 2011, Smith pleaded guilty and on 4 August, 2011, Angela Smith and Cunningham were found guilty of all counts before the jury. Smith, his wife, and Cunningham were sentenced on 30 March, 2012, to prison terms of 11 years and three months, three years, and seven years, respectively.

 

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