Miami Federal Court Orders Over $225 Million in Forex Fraud Penalties

Miami, Florida – Nine people and organizations engaged in a massive foreign exchange fraud and misappropriation scheme have been ordered to pay over $225 million in penalties by the U.S. District Court for the Southern District of Florida, in a historic decision. The Commodity Futures Trading Commission (CFTC) declared that Judge Darrin P. Gayles had issued a default judgment order against five companies and four individuals. The companies and individuals included Alla Skala from New York and Canada, Borys Konovalenko from Ukraine, Borys Davis from Mississippi, and Anna Shymko from Georgia.

The CFTC accused these defendants of fraud, misappropriation, and registration breaches over a fraudulent currency scheme in August 2022, and this complaint was the basis for the decision. They are held accountable by this ruling for breaking the Commodity Exchange Act (CEA) and CFTC rules. In addition to imposing a $169 million civil monetary penalty, the court ordered the defendants to pay approximately $56 million in restitution to clients they misled.

The defendants are permanently prohibited by the court's decision from trading in any markets governed by the CFTC and from registering with the agency. The defendant's activities resulted in the theft of over $57 million in client cash; the court stressed the seriousness of this verdict, which represents a major win in the battle against financial fraud.

Additional Order Concerning Timothy F. Stubbs

The court also imposed a supplementary consent order against Timothy F. Stubbs, a certified public accountant from Atlanta, Georgia, in addition to the default judgment. $153,000 in reparations and $314,000 in civil fines were mandated for Stubbs. In December 2023, the court issued an initial consent order against Stubbs because he participated in fraudulent actions via Grovee LLC, one of the firms involved in the conspiracy. The judgment included trading prohibitions and a permanent injunction.

Background of the Case

Using the ROFX.net website, the defendants ran a joint venture from January 2018 to September 2021, deceitfully obtaining and stealing at least $57.5 million from clients across the world. They made up the notion that they trade forex using a very profitable automatic trading robot that ensures loss coverage. Nevertheless, money that belongs to customers was pilfered and moved to offshore accounts unrelated to forex trading.

Furthermore, the firms solicited and accepted orders for FX transactions without the required CFTC registration, therefore operating as futures commission merchants. The court's conclusions highlight how methodical and dishonest their business practices were, preying on the confidence of clients looking for respectable forex trading prospects.

The Advisory and Enforcement Actions of the CFTC

The CFTC has emphasized the value of vigilant customers and the need to carefully confirm a company's registration status before investing. The Commission has released some guidance on spotting fraud, particularly in forex trading. It is recommended that the public use the NFA BASIC system to verify whether a corporation is registered with the CFTC and that they use the hotline or online complaint system to report any questionable activity.

The Alabama Securities Commission, the Mississippi Secretary of State's Office, the Rankin County Sheriff's Office, and the Oregon Division of Financial Regulation were among the state and local enforcement agencies that the CFTC acknowledged for their significant help. This successful legal action was made possible in large part by the Division of Enforcement personnel, particularly Danielle Karst, Timothy J. Mulreany, George H. Malas, Kelly Makimoto-Murphy, Chrystal Gonnella, and Paul G. Hayeck.

In summary

This court decision is an essential reminder of how important regulatory supervision is in protecting investors from dishonest investment schemes. The offenders were hit with significant fines and indefinite bans, which emphasize the seriousness of breaking commodities trading regulations and the CFTC's dedication to preserving market integrity.