LOS ANGELES (CN) — Federal regulators accuse a Southern California couple of conning hundreds of clients out of nearly $3 million through a phony online program to teach them how to get rich in commodities trading.
The Commodity Futures Trading Commission claims in a federal lawsuit that Joseph Dufresne and Megan Renkow and their company, United Business Servicing, created an elaborate construct of false ads and dubious training tools — including a "Live Trade Room" where investors watched Dufresne make allegedly profitable trades that never actually took place.
Dufresne aka Joseph James and Renkow aka Megan James, of Palos Verdes Estates, are husband and wife.
Since October 2011, at least 877 customers have paid more than $2.7 million for memberships in a program the defendants call SchoolofTrade.com, or SoT, according to the Sept. 30 complaint.
To lure them in, Dufresne, Renkow and UBS "made numerous false and misleading statements ... concerning: a) the professional experience and trading success of Dufresne; b) the profitability and performance record of SoT's trading strategies and systems; and c) the actual nature of the trading activity purporting to take place during SoT's 'Live Trade Room,'" the CFTC says.
A woman who answered a call to SchoolofTrade.com's 1-800 number Monday evening said she would make "no comment at this moment."
Dufresne and Renkow, also known as Joseph and Megan James, began UBS LLC in 2008 and apparently started SchoolofTrade.com later the same year. They started another version of the company, UBS Inc., in 2011.
The defendants sell several levels of membership in SoT, ranging in price from $249.99 a month to a lifetime membership for $4,999. SchoolofTrade is still operating and brought in an average of $60,000 per month in the first four months of this year, the CFTC says.
Customers get "varying degrees of access to trading strategies and systems" for trading commodity futures contracts, including seminars, training videos, one-on-one training sessions and access to the Live Trading Room, according to the complaint.
Offerings include three "different fully automated and semi-automated trading systems for our clients to make money on any market, any time of the day," the CFTC says, quoting the SoT website. The systems use "cutting-edge algorithmic trading technology" allowing "our computer to do the trading for us."
The Live Trade Room, SoT's "most highly touted benefit," is a web-based video feed where "we watch charts, call trades, teach our strategies, and answer questions that are typed into the chat box," the CFTC says, quoting the website.
On the site, in social media postings and in emails, Dufresne and Renkow promised potential clients they could make hundreds of dollars a day and thousands a month. "It will take you a little over one month to recoup your total investment," she emailed one prospect, according to the complaint.
Dufresne describes himself in his promotions as an award-winning day trader with 14 years of experience in many types of commodities. Those boasts are false and misleading, the CFTC says.
"Dufresne has not been a professional trader since 2000, nor has he been recognized for his trading acumen as described above. In fact, prior to 2007, not only was Dufresne not a professional trader, he had no trading experience whatsoever."
He was, however, sentenced to six months in jail in 2005 for felony attempted sale of narcotics, according to the lawsuit.
The Live Trade Room is phony too, the CFTC says: All the defendants' statements about making live trades in real trading accounts are false.
"SoT has never had any trading accounts in its name and none of the accounts in the name of either UBS LLC or UBS Inc. has ever been profitable," the CFTC says.
The CFTC does not say whether clients lost money making "shadow trades" following Dufresne's moves in the Live Trade Room. CFTC spokesman Dennis Holden said he could not comment on that point.
"I would be going beyond the complaint," he said.
Jerry W. Markham, an expert in commodities trading at Florida International University College of Law, said the CFTC need not prove that any customer lost money on trades to succeed in its lawsuit.
After reading the complaint, he described the defendants' operation as "a pretty standard fraud in the commodities market."
"It's a con game," Markham said.
Accusing the defendants of fraud and of failing to post required risk notices, the CFTC seeks restitution and a civil penalty of "the greater of $167,728 or triple defendants' monetary gain for each violation" of the commodities trading act and regulations. It also wants an injunction shutting down the operation down and prohibiting the defendants from ever trading again.
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