A federal court in New York has ordered more than USD4.6 million in restitution and a civil monetary penalty in a 2003 CFTC enforcement action against defendants Thomas Qualls and his company, International Foreign Currency, Inc. (IFC), which charged the defendants with misappropriation, fraudulent solicitation, and unlawfully offering off-exchange foreign currency (forex) futures contracts.
Judge Dora L Irizarry, of the US District Court for the Eastern District of New York, entered an order granting the CFTC summary judgment, finding that the defendants had committed fraud as alleged in the CFTC’s complaint, and requiring the defendants to pay USD814,733 in restitution and a USD3.84 million civil monetary penalty for operating an illegal off-exchange forex futures fraud from November 2001 to July 2003.
The court’s order stems from a CFTC complaint filed on July 23, 2003, that charged Qualls, IFC, and Michael Kourmolis with fraudulently soliciting customers to trade illegal off-exchange forex futures contracts and Qualls and IFC with misappropriation of customers’ funds (see CFTC Press Release 4825-03, July 30, 2003). Subsequently, on November 10, 2009, the court entered a consent order of permanent injunction against defendant Kourmolis (see CFTC Press Release 5749-09).
On 5 November, 2008, in a related criminal action, Qualls was found guilty by a federal jury on 16 counts, including mail and wire fraud, conspiracy to commit mail and wire fraud, and obstruction of justice. The obstruction of justice charges related in part to acts of obstruction in connection with the CFTC’s investigation and litigation. On November 6, 2008, the jury also returned a verdict on related forfeiture charges, finding that Qualls received proceeds in the amount of USD922,382.
The court’s order against Qualls and IFC in the CFTC’s 2003 action held that the defendants could not re-litigate the underlying facts of Qualls’ criminal wire and mail fraud convictions as they related to the fraud allegations in the CFTC’s action. Accordingly, the court held that Qualls and IFC, through Qualls, had fraudulently solicited customers to trade in illegal off-exchange forex futures contracts by falsely telling customers that they would have individual accounts at a national bank insured up to USD25 million. The court also held that Qualls and IFC, through Qualls, issued false account statements to customers showing purported profits and, instead of trading customer funds, misappropriated those funds by using them for personal expenses, in violation of the Commodity Exchange Act and CFTC regulations.
Qualls absconded to Canada before closing arguments in the criminal trial and was a fugitive until March 17, 2009, when Canadian authorities apprehended him. He currently is in a detention centre in Montreal, Quebec, Canada, as US authorities seek his extradition. He has not yet been sentenced.
