A U.S. federal court has ordered over US$23 million in monetary penalties and restitution against several firms and individuals, including a Canadian, in connection with an alleged Ponzi scheme.

The U.S. Commodity Futures Trading Commission (CFTC) announced Monday that it has obtained a federal court judgment requiring Complete Developments, LLC (CDL), Investment International Inc. (I3), Kevin Harris and Keelan Harris, all from Ohio, and Karen Starr of Barrie, Ont. to collectively to pay restitution and civil monetary penalties of over US$23 million “for solicitation fraud and misappropriation in connection with operating a multi-million dollar off-exchange foreign currency Ponzi scheme.”

The CFTC says that the court found that CDL, I3, Kevin Harris, and Starr violated anti-fraud provisions of derivatives trading laws “by fraudulently soliciting customers to trade forex and misappropriating customer funds.” It also finds that, between November 2006 and October 2008, CDL and I3 fraudulently solicited and accepted funds from customers seeking to open ‘professionally managed’ forex trading accounts, and that customers invested more than US$23 million.

“Rather than trading forex on their customers’ behalf, the [court’s] opinion finds that CDL and I3 operated as a Ponzi scheme and used customers’ money to make payments to other customers and for Kevin Harris, Keelan Harris, and Starr’s own personal use,” it says, adding that it also concludes that the Harrises and Starr controlled CDL and I3 and are liable for the firms’ fraudulent conduct.

The regulator reports that Judge David Dowd, Jr. of the U.S. District Court for the Northern District of Ohio entered the default judgment and opinion requiring CDL, I3, the Harrises, and Starr, to pay over US$15.7 million in restitution to defrauded investors. It also imposes civil monetary penalties of US$2.49 million on Kevin Harris, US$2.49 million on Keelan Harris, and US$2.64 million on Starr and permanently bans them, CDL, and I3 from trading and registering with the CFTC and from violating anti-fraud provisions of the Commodity Exchange Act.

Additionally, the judgment orders relief defendants, Majestic Enterprises Collision Repair, Inc., an Ohio-based firm, and UCAN Overseas Corporation S.A., of Panama, to disgorge over US$1 million, “consisting of customers funds that they received, but are not entitled to, as a result of the defendants’ fraudulent conduct.”