The U.S. Commodity Futures Trading Commission (CFTC) recently announced that a federal court in Texas had entered a final judgment order imposing monetary sanctions against Premium Income Corp. (PIC), and its affiliates, Inforex, Ltd., and Tri-Forex International, Ltd. totaling more than $123 million.
The court’s order followed a joint enforcement effort by the CFTC, the Securities and Exchange Commission, and the Department of Justice.
PIC, its affiliates and their principals (Gerald Leo Rogers and Alexander Ignor Shevchenko) had been charged by the CFTC with fraud in the sale of illegal foreign currency (forex) covered call options and misappropriating customer funds back in March of 2005.
The court’s order requires PIC and affiliates to pay $12,374,104 to customers and imposes a civil penalty of $37,122,312, as well as prohibiting engaging in any future commodities trading activities.
According to the release, beginning in January 2004, PIC and affiliates solicited customers’ funds by representing that the funds would be used to engage in foreign currency covered call transactions, and that customers would be guaranteed a profitable annual return on their funds of between 10% and 14.2% with no risk of loss to their principal. Victims were told that PIC made its “fixed income strategy of the decade” available exclusively in the United States under a special license agreement with a Swiss bank. However, customers were not told that their funds were immediately transferred from PIC bank accounts to accounts controlled by Rogers. In addition to sustaining large losses through highly speculative forex trading, unbeknownst to customers, a portion of those funds was used for personal expenses and paid to individuals who solicited customers.
“This case was part of a broader focus into forex fraud that started several years ago as a result of the clarification of our jurisdiction. Since then, through a combination of aggressive investigators and litigators, the Commission has filed actions against more than 350 defendants who scammed more than 25,000 retail customers,” Gregory Mocek, the CFTC’s Director of Enforcement, was quoted as saying.
Rogers was arrested at the time the CFTC initiated its action and was incarcerated in a Federal Penitentiary in Texas, according to the release.
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