Washington D.C.- The Commodity Futures Trading Commission today announced that it has filed a civil lawsuit in the U.S. District Court for the Eastern District of California against Eshaq M. Nawabi of Salida or Manteca, California and its companies Nawabi Company and Hyperion Consulting Inc. The suit accuses the defendants of fraud and misappropriation related to an off-exchange foreign currency (forex) trading system in which they solicited funds totaling at least $543,000 from at least seven investors.
Background to the case
According to the complaint, from around October 2019 so far, defendants have solicited and pooled hundreds of thousands of dollars from at least seven pool participants for the alleged purpose of trading currencies. To persuade pool participants to send them money, defendants made fraudulent and material misrepresentations and omissions, including that they had historically made large profits, between 8 and 25% per month, for them themselves and participants in the pool by trading in forex; (2) pool participants would earn 8-25% profit per month on their funds with minimal risk; (3) the defendants exchanged currencies with the funds deposited by the participants in the pool; and (4) upon request, pool participants could withdraw their funds at any time.
Instead of exchanging pool participants’ funds as promised, the defendants misappropriated their money for Nawabi’s personal benefit as well as to pay other pool participants in a Ponzi scheme. To conceal their misappropriation, the defendants created and issued false account statements that misrepresented the trading returns allegedly earned by pool participants. When pool participants demanded the return of their funds, defendants either ignored their demands, provided false promises and excuses, or engaged in conduct designed to delay payments to pool participants as long as possible.
CFTC obtains legal restraining order
On April 28, 2022, Chief District Judge Kimberly J. Mueller issued a statutory restraining order against the defendants, freezing their assets and allowing the CFTC immediate access to their books and records. Additionally, the court has scheduled a preliminary injunction hearing for May 11, 2022.
In Continuing Litigation, CFTC Seeks Full Restitution to Defrauded Pool Participants, Return of Any Ill-gotten Gains, Civil Monetary Penalty, Permanent Record and Trading Bans, and Permanent Injunction Against Future Violations of the Commodities Exchange Act, as charged . The CFTC warns that orders requiring the return of funds to victims may not always result in the recovery of lost money because wrongdoers may not have sufficient funds or assets.
The CFTC thanks the US Marshalls of the Eastern District of California for their assistance in this matter.
The Enforcement Division staff responsible for this case are W. Damon Dennis, Sarah Wastler, Maura Viehmeyer, Erica Bodin, James H. Holl, III and Rick Glaser.
CFTC Forex Fraud Notice
The CFTC has published several customer protection fraud notices and articles that provide the warning signs of fraud, including the Foreign Exchange (Forex) Trading Fraud Notice, which warns customers of forex fraud and lists simple ways to spot forex scams.
The CFTC also urges the public to verify a company’s registration with the CFTC before committing funds. If not registered, a client should be wary of providing funds to this entity. A company’s registration status can be found using NFA BASIC.
Customers and others may report suspicious activity or information, such as possible violations of commodity trading laws, to the Enforcement Division through a toll-free hotline 866-FON-CFTC ( 866-366-2382), file a tip or complaint online, or contact the Whistleblower Bureau. Whistleblowers are eligible to receive between 10 and 30 percent of collected monetary penalties paid by the Customer Protection Fund funded by monetary penalties paid to the CFTC by violators at the CEA.