New Zealand Registered Broker IB Capital FX Charged by CFTC in $50m Scheme

The case is related to Senen Pousa and Investment Intelligence Corporation that had over 960 clients worldwide.

Victor Golovtchenko

Monday, 16/11/2015|23:29 GMT

A New Zealand registered forex broker that has long had its website suspended after having its license revoked by the local authorities has become a target of a particularly powerful regulator. In what is another case of the massive loopholes in New Zealand legislation being demonstrated, this company, that has been closed since May 2014, is facing tough legislative action in the U.S.

The U.S. Commodities and Futures Trading Commission (CFTC) has charged IB Capital FX LLC alongside its agents Michel Geurkink and Emad Echadi with soliciting at least $50 million from investors.

an average of just over $50,000 per depositor was lost

The civil enforcement filed by the regulator also charges the defendants as individuals. According to the information detailed in the complaint that was filed by the regulator, at least 960 clients worldwide, at least 697 of which have been U.S. residents, have deposited funds with the brokerage. That totals to an average of just over $50,000 per depositor.

"Investments" were made in 2012

The wrongdoings occurred between January 1st, 2012 through to September 18th, 2012, according to the U.S. regulator. Clients of the company were assured that their funds can be used to trade foreign exchange contracts over the counter, however IB Capital FX LLC was never authorized by the CFTC to take their deposits.

Mr Echadi has been listed as director of the company in the company’s New Zealand office from December 2011 until its closure in May 2014 with a residential address in the Netherlands.

The scheme that the CFTC is exposing here has been connected to http://www.financemagnates.com/forex/regulation/us-regulator-charges-australian-and-us-resident-for-53-million-forex-fraud/ that also stirred a lot of controversy in Australia. Back in 2012, the Australian Securities and Investments Commission (ASIC) claimed that Australian national Senen Pousa had been providing financial services illegally through his company Investment Intelligence Corporation.

The CFTC initially charged Investment Intelligence Corporation and Senen Pousa

Mr Pousa founded a financial advice program dubbed ProphetMax that used the New Zealand based broker IB Capital FX LLC. The CFTC initially charged Investment Intelligence Corporation (IIC) and Senen Pousa, yet almost 3 years later it has apparently also confirmed the involvement of the brokerage in the scheme.

The http://www.financemagnates.com/forex/regulation/cftc-orders-australian-schemers-to-pay-192-million-in-fines-and-restitution/ in fines and restitution. Back in 2012, IB Capital claimed on its inactive website that it was relocating to Europe, however the website never reopened for business despite offering a working page that accepted applications for withdrawals.

The New Zealand incorporated brokerage was telling clients to deposit their funds into an ING bank account in the Netherlands.

The same people have also been directors of a string of similarly named and similarly behaved companies in both New Zealand and the UK.

The U.S. regulator has worked on the case in conjunction with regulators in Australia, the United Kingdom, Hungary and New Zealand. The investigation has also been helped by several other U.S. authorities including the Securities and Exchange Commission (SEC), the Department of Justice (DoJ), the Federal Bureau of Investigation FBI and others.

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The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action charging Senen Pousa of Australia, Joel Friant of Bellingham, Wash., and their company, Investment Intelligence Corporation (IIC), an Australian corporation, with operating a fraudulent off-exchange foreign currency (forex) scheme. The complaint also charges Michael Dillard and Elevation Group, Inc., both of Austin, Texas, with registration violations. The scheme allegedly accepted at least $53 million from at least 960 clients worldwide, including at least 697 clients in the United States, and clients in Australia, the United Kingdom, Canada, Germany, the Netherlands, and Singapore, among other countries. None of the defendants has ever been registered with the CFTC.

On the same day the CFTC complaint was filed, September 18, 2012, Judge Lee Yeakel of the U.S. District Court for the Western District of Texas issued an emergency order freezing the assets of defendants Pousa, Friant, and IIC and prohibiting the destruction of books and records.

The CFTC complaint alleges that from at least January 1, 2012 through the present IIC, through Pousa, Friant and its other agents, and defendants Dillard and Elevation Group, utilized "wealth creation" webcasts, webinars, podcasts, emails, and other online seminars via the Internet to directly and indirectly solicit actual and prospective clients worldwide to open forex trading accounts at IIC. The complaint further alleges that clients were promised by IIC, through Pousa, Friant, and other agents 1) a monthly return of 9 percent, 2) that IIC’s managed forex trading would risk less than 3 percent of a client’s capital per transaction, 3) that IIC was able to limit the risk inherent to forex trading by limiting its managed forex trading to 2 to 5 trades per month, and 4) that IIC has six "proprietary traders" working 24 hours a day trading clients’ funds. The CFTC complaint alleges that all of these representations to clients were false.

On or about May 16-17, 2012, the complaint alleges that clients suffered a loss of over 60 percent of their investment, when IIC, by and through its agents, entered over 200 forex trades in each client’s account in violation of the representations made by IIC, by and through its agents.

The CFTC complaint seeks restitution, rescission, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the anti-fraud provisions of federal commodities laws, as charged.

Further, on September 18, 2012, the court entered a consent order of permanent injunction and ancillary equitable relief against defendants Michael Dillard and Elevation Group, Inc. According to the consent order, the court found that Elevation Group acted as an Introducing Broker and solicited orders from non-ECPs in connection with leveraged forex transactions without registering with the CFTC. The court further found that Dillard acted as an unregistered Associated Person of the Elevation Group, according to the order.