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The U.S. Commodity Futures Trading Commission (CFTC) announced Thursday that it has filed charges against two defunct forex firms and their operators who allegedly swindled more than USD 700,000 from investors they duped into investing in a Ponzi scheme.

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According to the complaint, Thomas Lanzana and his company Blackbox Pulse (Unique Forex), Nikolay Masanko and his company White Cloud Mountain, LLC, fraudulently solicited the money from several unsuspecting investors to participate in their forex trading pools and other investments.

To create the illusion of stability, the defendants allegedly prepared and distributed false account statements to pool participants, telling them that Lanzana was a successful forex trader. All the while, Lanzana concealed $12,000 in trading losses from investors and published false statements showing balances of $800,000 for a forex trading account that did not exist.

As a result, at least 31 pool participants gave the defendants a total of $700,000 to trade in their purported forex pool, the agency said.

Created in February 2013 and dissolved in February 2017, the investment pools didn’t generate any income while Lanzana misappropriated $350,000. Additionally, in order to shore up the fraud, he used a Ponzi scheme style where he issued payments to investors that he claimed represented profits but were in fact other investors’ funds.

According to the complaint, Lanzana also spent a portion of purported forex pool’s funds “to pay for his personal expenses, including purchases on Amazon.com, payments to a luxury car dealer and a jewelry retailer, and golf expenses, among others, as alleged.”

Immediately after the complaint was filed, Judge Madeline Cox Arleo of the New Jersey District issued an emergency order freezing preserving assets under the defendants’ control and prohibiting them from “destruction or concealment of their books and records”. The court scheduled a hearing for September 20, 2017.

The CFTC has asked the court to provide full restitution to defrauded pool participants, disgorgement of ill-gotten gains and to pay the appropriate civil monetary penalties. In addition to fiscal claims, the agency seeks permanent registration and trading bans and a permanent injunction from future violations of federal commodities laws.