The Commodities Futures Trading Commission (CFTC) has sued Traders Domain FX Ltd (TD) for operating a scheme that defrauded investors of over $283m from 2019 to 2022. These customers included Americans, despite the Canada-based company not being registered with the CFTC as a commodity pool operator.

The agency has accused the company, as well as its co-owners Ted Safranko and David Negus-Romvari, of making material fraudulent representations to more than 2,000 customers and misappropriating their funds.

To achieve this end, they relied on the services of outside entities who acted as sponsors to solicit more customers, and paid them commissions per recruitment in a manner similar to a multilevel marketing program, the CFTC said.

Sometimes, those commissions were as high as 60% of ostensible trading profits.

Those entities, Algo Capital (now Quant5 Advisor) and Centurion Capital Group, along with associated individuals, are also being charged by the CFTC for facilitating what they knew or should have known was fraud.

Misappropriation and misstatement

The CFTC accused the defendants of lying about XAU/USD investment pools, which were supposed to trade contracts based on the comparative prices of the US dollar and gold. TD allegedly solicited customers by promising returns of 5,000% or more beginning in 2021.

However, TD allegedly misused customer funds by trading them in a manner that was inconsistent with agreed-upon terms. This included taking contributions but never investing them, and charging fees on transactions that never happened, and prohibiting withdrawals of money on demand.

TD apparently also lied by saying that “bots” were involved in the transactions, when in fact the trades were completed manually.

To cover this up, TD cooked its books to make it seem like all of the transactions were above board, leading to additional charges for falsifying trading records.

And as the scheme fell apart in 2022 and customers found themselves locked out of their accounts, TD downplayed the catastrophe and continued to solicit, and squander, customer funds for an additional six months.

Part of this involved rebranding itself as Trubluefx, which it billed as an “acquisition” to further obfuscate the involvement of fraudulent activity and explain withdrawal delays.

Asset freeze and relief sought

To facilitate their investigation, the CFTC was granted an asset freeze on October 3 of all involved entities by federal judge Roy K Altman. A hearing will be held at the end of the month.

The CFTC seeks “disgorgement of ill-gotten gains, civil monetary penalties, restitution, trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations.”

Rule violations

For the fraudulent activities, TD, Safranko and Negus-Romvari were charged with violating 7 U.S.C. § 6b(a)(2) / Section 4b(a)(2) of the CEA, which covers fraud, dishonesty, and misleading statements.

TD and Safranko were also charged with violating 7 U.S.C. § 6b(a)(2)(B)/ CEA Section 4b(a)(2)(B) covering false or misleading reports and deceptive trading practices.