The CFTC announced late yesterday that is has finally revoked commodity trading advisor ( CTA ) registration of M25 Investments, Inc. and M37 Investments, LLC. These Texas-based investment firms and their operators,
Scott P. Kear, Sr., Jeffery L. Lyon, were ordered to pay over $16 million in restitution and civil monetary penalty for foreign exchange fraud and Ponzi scheme.
According to the October 2010 court order, Lyon and Kear fraudulently solicited investments from the public for their CTA, preying mainly on the elderly via churches in West Virginia, Texas, Mississippi, and Maryland. They would guarantee two percent interest on investments and twenty-four percent annually, in addition to a two percent renewal bonus. The defendants also promised profitable returns. However, most funds were not used for trading, and those that were sustained massive losses. In order to pay the promised interest, Lyon and Kear used new customers’ investments, and then falsified monthly statements to keep participants in the dark. The CTA’s scheme lasted between December 2007 and September 2009, at which point the CFTC froze their assets and filed charges against the defendants.
The CFTC warned M25 and M37 they were on track to lose their CTA registration this February, several months after the civil order. A CFTC Administrative Law Judge handed down the Initial Decision on May 4th, and it was finalized today. The order permanently revokes the firms’ CTA registration under the Commodities Exchange Act (CEA) because of the court order against them.