A U.S. district court has frozen the assets of an unregistered trading firm based in Canada, amid allegations that the firm is at the centre of a US$280 million Ponzi scheme.
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the southern district of Florida alleging that the firm — Traders Domain FX Ltd., a company registered in St. Vincent and the Grenadines but operating from Canada — and its founders solicited investors for a scheme involving leveraged retail commodity trades, primarily gold-to-U.S. dollar pairs.
In its complaint, the CFTC alleges that the firm, and its founders — Fredirick Teddy Joseph Safranko, a resident of Ontario and British Columbia, and David William Negus-Romvari, a resident of Ontario and Mexico — made “fraudulent and material misrepresentations” to investors on its website and on social media, as well as via email, text, and in-person.
It also alleged that the firm misappropriated customer funds by failing to use them for trading, and by charging commissions on fictitious trading profits.
Additionally, the CFTC alleged that several U.S.-based firms and individuals acted as “sponsors” for Traders Domain, raising funds from investors for the scheme.
“The sponsors actively downplayed red flags and continued to solicit customers, helping to create the false impression customers were participating in legitimate trading, even as the scheme was on the brink of collapse,” the regulator alleged.
Overall, the scheme allegedly took in at least US$283 million from investors before it began to unravel, as investors ran into trouble trying to withdraw their funds.
The allegations have not been proven.
Earlier this month, a federal district court judge issued an asset freeze against the various defendants, and set a hearing for Oct. 29.
The CFTC is seeking disgorgement, monetary penalties, restitution, trading and registration bans and permanent injunctions against the firms and people charged in the case.