The CFTC has obtained a default judgement against Jeffrey Alan Lowrance and his New Zealand-based company First Capital Savings and Loan for operating a fraudulent over-the-counter foreign exchange (“forex”) scheme. They are required to jointly and severally pay $3.3 million as a civil monetary penalty and $1.2 million in restitution. Lowrance was charged in July 2011 after he was apprehended in and extradited from Peru. He also faces charges from the SEC and U.S. Attorney General’s Office.

The order finds that from June 2008 to at least February 2011, the defendants fraudulently solicited at least 36 investors to trade off-exchange forex. Lowrance claimed to be a successful forex trader, and he promised monthly returns of 1.1-4.15%. He also manufactured and posted fake customer accounts showing monthly profits. Not only was Lowrance not an experienced forex trader, he failed to deposit any customer funds into forex trading accounts. Instead, the defendants misappropriated customer funds to enrich Lowrance’s family members, pay his personal expenses, and fund the creation of a religious newspaper. Customer funds were also used to make Ponzi payments to earlier investors in order to perpetuate the scheme.

In addition to the civil monetary penalty and restitution, the consent order imposes permanent trading and registration bans against the defendants. Unusually, it also requires any person or entity that provides the defendants with web-hosting or domain registration services to remove any website soliciting the public to trade commodity futures or forex.

Read more about this CFTC enforcement action.
photo credit: Mukumbura