Forex fraud conspirators ordered to pay penalties

The CFTC announced that it has won a federal consent order finding Gary D. Martin, Brenda K. Martin, and their company Queen Shoals Consultants (“QSC”) led an over-the-counter foreign exchange (“forex”) scheme that defrauded customers of millions. A federal judge in North Carolina has ordered the Martins and QSC make full restitution to all investors who gave the defendants money as a “result of the course of the illegal conduct,” and to pay civil monetary penalty agreed upon at a future date.

The original CFTC complain alleged that from June 18, 2008 to August 7, 2009, the Martins and QSC used in-person solicitations, written materials, the internet, and third-party agents to solicit investors. The defendants represented themselves as knowledgeable about the forex market, with twenty years of experience in the financial services sector.  This was a fraudulent claim–the defendants had no forex expertise or experience, and their profit guarantees were false.

However, the Martins and QSC were able to solicit $22.3 million from individuals and entities purportedly to trade forex. That money was then turned over to Sidney Hanson without customer knowledge. Mr. Martin admitted under oath that he, Brenda Martin, and QSC never traded or invested in any forex accounts.

Hanson allegedly gave a 5% referral fee to the Martins for each customer’s investment. The Martins received at least $1.44 million this way. In 2009, Hanson was charged by the CFTC with runing a forex Ponzi scheme with the money he and the Martins misappropriated.

Hanson has pled guilty to securities fraud and mail fraud in connection with the forex Ponzi scheme run through QSC and other entities. In April 2011, he was sentenced to 22 years in prison and ordered to pay $33 million in restitution and civil monetary penalties. The Martins and QSC are subject to permanent trading and registration bans.

Read more about this CFTC enforcement action.
Creative Commons License photo credit: Kamal H.

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