CFTC secures $22.6M + cash pallet

A $7 Million Assist
March 4, 2020
SEC Offers Covid Reprieve
March 25, 2020

CFTC secures $22.6 million judgment and a pallet of cash from Forex fraudsters

The U.S. District Court for the Middle District of Alabama has entered a final judgment against Husam Tayeh of Illinois and his companies Dinar Corp., Inc. and My Monex, Inc., both Nevada corporations for running a fraudulent foreign currency (Forex) scheme. The judgment scores a win for the Commodity Futures Trading Commission (CFTC) in which the court has ordered the defendants to pay more than $22.6 million in disgorgement and civil monetary penalties. Previously, the court found the defendants liable for violations of the Commodity Exchange Act, including fraud.

Fraudulent solicitation

According to CFTC Director of Enforcement James McDonald, the verdict, the result of a bench trial, stems from a July 27, 2015 complaint filed by the CFTC charging the defendants with fraudulently soliciting customers to engage in financed retail forex transactions, primarily involving Iraqi Dinar and Vietnamese Dong, misappropriating customer funds, and a host of registration violations.  Also charged for receiving funds obtained as a result of fraud was relief defendant Theodore S. Hudson, II.

Is there a problem with Forex?

Not necessarily. Just this program. In running his scheme to sell Iraqi dinar, Tayeh created multiple business entities, including Dinar Corp, Inc., and My Monex, Inc. However, neither Tayeh nor his businesses ever registered with the CFTC.

What was the scam’s plan?

Typical Ponzi with a dash of installment contracts

Customers interacted with Dinar Corp. through the website (www.dinarcorp.com), paying for dinar with United States dollars in the form of cashier’s checks or money orders payable to My Monex. Tayeh then sent these payments to an individual in Dothan, Alabama, for processing.

As part of this scheme, Tayeh offered an installment contract option through which he promised, upon receipt of an initial ten-percent payment, to set aside the full amount of dinar called for by the contract as well as an additional quantity of dinar that would be available for purchase at a locked-in price. Tayeh promised to transfer the reserved dinar to the customer after receiving the remaining payments.

Surprise! No set-asides

Despite his promises, Tayeh set aside only a small fraction of the dinar that he sold through installment contracts. He did fulfill some contracts for dinar, but he did not actually have the hard currency necessary to fulfill contracts as they were issued.

The prosecutors explained that the scheme succeeded because “there was never an instance in which enough of Tayeh’s customers completed their installment contracts at the same time so that Tayeh was unable to fulfill an order for dinars.”

The beginning of the end for Tayeh’s scheme came when government agents executed warrants at his business. And, on February 14, 2020, U.S. District Court Judge Andrew L. Brasher resolved those issues by entering a final judgment against the defendants, ordering them to pay disgorgement of $22,559,153 and a civil monetary penalty of $140,000.

What about the seized pallet of cash?

In a separate order, the court released a pallet of Iraqi Dinar and Vietnamese Dong that had been seized from the defendants as an offset against the final judgment to the CFTC. At the time of seizure, it was valued at more than $2.5 million. 

Related Criminal Action

In a related criminal action, on June 7, 2016, the U.S. Attorney’s Office for the Middle District of Alabama charged Tayeh with one count of wire fraud to which he pled guilty. He was sentenced to one year plus one day of prison and ordered to forfeit more than $8 million and pay $151,517 in restitution to identified victims.

 And, where was compliance?

Nowhere to be found. Oversight matters, and that’s where Patrina could have helped. For more than 25 years, Patrina has been helping uniquely committed compliance professionals like you to stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.  

Request A Demo
We will contact you shortly to arrange your demonstration.
We respect your privacy. Your information is safe and will never be shared.
Don't miss out. Subscribe today.
×
×
WordPress Popup Plugin