The British Columbia Securities Commission (BCSC) is accusing an unregistered foreign exchange trader of defrauding investors by concealing how he earned commissions, offering clients false guarantees, and engaging in unregistered trading.
The BCSC said Tuesday that it has issued a notice of hearing alleging that, between April 2009 and June 2011, Hong Liang Zhong filled out electronic applications to open trading accounts for 14 investors at two online brokerage firms, in order to trade forex on their behalf; and, it says that in the account applications he listed himself as a referring broker so he could receive commissions from the brokerage firms based on the volume of trading in their accounts.
It alleges that Zhong made his spouse the trading agent on the accounts so that he could collect the commission, but that, in reality, he executed the trades on behalf of the clients. Moreover, the regulator claims that Zhong concealed the commission arrangement from clients, which generated over US$100,000 for him; and that his trading lost US$268,305 of the US$403,012 that his clients invested. By misrepresenting the true nature of his commissions to his clients and to the online brokerage firms, Zhong perpetrated a fraud, the BCSC claims.
Additionally, it alleges that Zhong guaranteed at least four of the clients that he would return their full principal if they suffered trading losses, which he did not do.
The allegations have not been proven. A date to hear the case is to be set on September 3.