Federal Court Orders California Forex Company, Owners To Pay Over $ 4 Million For Pool Fraud And Registration Violations

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Washington DC– The Commodity Futures Trading Commission today announced that the U.S. District Court for the Northern District of California has issued a consent order for a permanent injunction, monetary penalties and fair relief against the defendants Travis Capson from Kanab, Utah, Arnab sarkar from El Cerrito, California, and their California company Denari Capital, LLC (Denari) to resolve a CFTC action filed on November 5, 2019. [See CFTC Press Release No. 8073-19].

The order finds the three defendants responsible for engaging in currency pool (forex) fraud and failing to register with the CFTC as a commodity pool operator and associated persons , as required. The order also holds Capson responsible for making false statements regarding Denari’s activities at the National Futures Association (NFA).

The order requires Capson and Sarkar to pay civil monetary penalties of $ 250,000 and $ 166,000, respectively. In addition, they and their company, Denari, are required to pay restitution of $ 3,663,282 to the victims of their scheme. The order also imposes a permanent injunction barring defendants from further violations of the Commodity Exchange Act and CFTC regulations, as charged, permanent registration bans and five-year trading bans.

Context of the case

The order finds that from at least August 2012 to December 2019, the defendants fraudulently solicited participants to invest with Denari, distorting the past profitability of Denari’s forex trading. The order also finds that the defendants issued false statements of account to the participants which distorted the profitability of their respective interests in the pool; did not receive funds from the pool on behalf of the pool; poorly mixed mutual funds; and did not provide the required information about the forward pool. Further, the order finds that the defendants did not register with the CFTC as required. The order also finds that Capson made false statements to the NFA during a review conducted on July 15, 2019, when he told NFA officials that Denari has been trading forex with proprietary funds since 2015, and Denari did not trade forex for third parties until 2019.The order appoints Kathy Bazoian Phelps as Denari’s permanent receiver, to collect and distribute the restitution. Phelps has raised and distributed over $ 700,000 in funds and over $ 2.5 million in securities to satisfy authorized participant claims. However, the CFTC continues to warn victims that restitution orders may not always result in the recovery of lost money, as wrongdoers may not have enough funds or assets. The CFTC will continue to fight vigorously for the protection of clients and to hold violators accountable.

The CFTC thanks the NFA for its assistance.

The Enforcement Division staff responsible for this action are Carlin Metzger, Joy McCormack, Matthew Edelstein, Joseph Konizeski, Scott Williamson and Robert Howell.

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CFTC Forex Fraud Notice

The CFTC has issued several customer protections Fraud notices and articlesthat provide warning signs of fraud, including Currency Trading Fraud Notice (Forex), which alerts clients to forex fraud and lists easy ways to spot forex scams.

Customers and others can report suspicious activity or information, such as possible violations of commodity trading laws, to the Enforcement Division via a free hotline 866-FON-CFTC (866-366- 2382), tip or complainonline or contact the Whistleblower office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary penalties levied paid by the Client Protection Fund funded by the monetary penalties paid to the CFTC by violators at the CEA.

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