The U.S. Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges against Forex Auto Profits, LLC (FAP) and its founder, Darren L. Shanks, formerly of South Jordan, Utah, for operating a fraudulent foreign currency (forex) scheme.
The CFTC ordered FAP and Shanks to pay civil monetary penalties of $750,000 and $500,000, respectively. It also directed FAP and Shanks to pay, jointly and severally, restitution in the amount of $1,702,770.94. It further barred the firm and its owner permanently from engaging in any commodity-related trading activities, including soliciting funds, registering with the CFTC and trading on behalf of themselves or others.
The CFTC found that between the period October 2007 to September 2009, Shanks received approximately $3.3 million from more than 45 investors to trade forex through false representations regarding his trading history, including that he typically generated monthly returns of three to five percent. It, however, ruled that Shanks did not generate profits from the investors’ money in forex trading. Every monthly investor statement falsely represented profits being generated. The trading details were similarly fictitious.
Respondents, through Shanks, misappropriated customer funds to pay personal and business expenses and to make distributions to other participants. Shanks used customer funds to pay for a variety of personal uses, including trips throughout the United States, car and house payments and satisfaction of support obligations, the order finds.
Likewise, the CFTC found Shanks to have failed to disclose to investors his prior criminal conviction in 1998 for embezzlement from a bank (as contained in the decision of United States v. Shanks, 2:98-cr-00084-DAK [D. Utah 1998]).
In July 2010, Shanks pled guilty to wire fraud in connection with a scheme to defraud or obtain money or property by means of materially false pretenses, representations or promises. Shanks is now serving a 41-month federal prison sentence. Criminal restitution was set at $1,702,770.94, which offsets restitution of the same amount entered in the CFTC’s order (see United States v. Shanks, No. 2:10cr00318 [D. Utah], and FBI/U.S. Department of Justice Press Release, July 30, 2010).