(CN) - A Buda, Texas, man faces federal claims that he steered a $7 million off-exchange foreign currency scam.
The U.S. Commodity Futures Trading Commission has charged Christopher B. Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants' funds and failing to register.
Cornett allegedly solicited prospective pool participants to provide funds for a pooled investment in forex between June 2008 and October 2011.
"Cornett acted as the manager and operator of the pool, which was referred to at various times as ITLDU, ICM, International Forex Management, LLC and/or IFM, LLC," the CTFC said in a statement Wednesday. "In soliciting prospective pool participants for the forex pool, Cornett allegedly falsely told prospective pool participants that, while there were weeks when Cornett either lost money or broke even trading forex, Cornett had never experienced a losing month or a losing year trading forex."
Of the $7.07 million raised from pool participants, $1.64 million was redeemed and Cornett lost $4.17 million trading forex, according to the complaint filed in Austin.
Between June 18, 2008, and September 2010, Cornett allegedly had only one profitable month and consequently stole $1.26 million from the pool. Most, if not all, of the profits, losses and account balances that Cornett reported to pool participants were false, according to the complaint.
Over the next year, Cornett allegedly solicited another $6.95 million from pool participants, and pool participants redeemed an additional approximately $2.22 million. During this period, Cornett transferred $1.81 million to accounts at three foreign firms and lost all but $1,600 trading forex.
Cornett also is alleged to have transferred $1.56 million to three additional foreign firms during this period.
He faces additional charges of failing to register as a commodity pool operator.
The CFTC is seeking restitution, disgorgement, civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations of federal commodities laws.Follow @davejourno
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