SECURITIES FRAUDSTER SENTENCED TO 20 YEAR PRISON TERM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Minneapolis-Based Fraudster Patrick Joseph Kiley Sentenced to 20 Years in Priso
The Securities and Exchange Commission announced that on July 15, 2013, the Honorable Chief Judge Michael J. Davis of the United States District Court for the District of Minnesota sentenced Patrick J. Kiley to 20 years in prison and ordered him to pay $155 million in restitution.  The sentence was based on Kiley’s conviction on 15 criminal counts including mail and wire fraud, conspiracy to commit mail and wire fraud, and money laundering for his role in a $194 million foreign currency trading scheme that defrauded approximately 1,000 investors.  Kiley was charged on July 19, 2011, and a jury found him guilty on June 12, 2012.

Kiley is one of the defendants in a pending civil injunctive action filed by the Commission on November 23, 2009 in the United States District Court for the District of Minnesota.  The Commission’s action against Kiley arose out of the same facts that are the subject of the criminal case against him.

The Commission’s complaint alleges that from at least July 2006 through at least July 2009, Kiley and co-defendant Trevor G. Cook of Minneapolis, Minnesota, raised at least $190 million (later determined to be $194 million) from 1,000 investors through the unregistered offer and sale of investments in a purported foreign currency trading venture.  According to the Commission’s complaint, Cook and Kiley pooled investors’ funds in bank and trading accounts in the names of entities they controlled.  The Commission’s complaint alleges that the foreign currency trading they conducted resulted in millions of dollars in losses, and they misused approximately one half of the investor funds to make Ponzi-like payments to earlier investors and pay for, among other things, Cook's gambling losses and the purchase of the historic Van Dusen Mansion in Minneapolis.

The Commission’s complaint charges Cook and Kiley with violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  On November 23, 2009, the Court entered a preliminary injunction order against Cook and Kiley and froze all of their assets.  On March 7, 2011, the Commission also filed a civil complaint in the U.S. District Court in Minneapolis against Jason Bo-Alan Beckman and his registered investment advisory firm Oxford Private Client Group, LLC, for their roles in this scheme.  On August 27, 2010, the Court entered an order of permanent injunction against Cook.  The Court also appointed a receiver to marshal and preserve all of the Defendants’ assets.

SEC ANNOUNCES ASSET FREEZE AGAINST MONEY MANAGER AND COMPANIES IN FOREX TRADING SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C., July 12, 2013 — The Securities and Exchange Commission announced an emergency asset freeze against an unregistered money manager and his companies in Plano, Texas, who are charged with defrauding investors in a foreign currency exchange trading scheme.

The forex market is a large and generally liquid financial market in which the risk of loss for individual investors can be substantial. The SEC has previously warned individual investors about the risks involved with forex trading.

The SEC alleges that Kevin G. White raised more than $7.1 million from investors by touting a sophisticated low-risk forex trading strategy yielding astronomical returns. He advertised his purported "25-year Wall Street career." In reality, the forex trading has incurred losses of investor funds, and White actually spent only six years as a licensed securities professional in Houston before being barred by the New York Stock Exchange two decades ago. White also lied about his education. Meanwhile, White has siphoned away more than $1.7 million of investor money to pay personal expenses, finance expensive trips, and fund other unrelated and undisclosed businesses and investments.

"White and his companies brandished phony credentials and a can't-miss trading strategy to lure investors into a web of deceit," said David Woodcock, Director of the SEC's Fort Worth Regional Office. "In reality, White was suffering forex trading losses and putting investor money to other uses."

The Commodity Futures Trading Commission (CFTC) today announced parallel charges against White and his companies.

According to the SEC's complaint that was unsealed late yesterday in U.S. District Court of the Eastern District of Texas, White raised investor money through two entities that he owns and controls: KGW Capital Management and Revelation Forex Fund. KGW Capital purports to be "one of the world's leading private investment firms."

The SEC alleges that White and his companies used websites, press releases, and presentations to prospective investors to solicit funds. White and his companies told investors that Revelation Forex was a $1 billion hedge fund that had achieved total returns of more than 393 percent since its January 2009 inception, and earned a compound annual rate of return of more than 36 percent. Marketing materials provided to prospective investors boasted that an initial investment of $250,000 in Revelation Forex in January 2009 would have grown to $983,111 by May 2013.

The SEC alleges that these claims were false. While White and KGW Capital tout a track record for the fund that began in January 2009, Revelation Forex did not actually receive investor funds or begin forex trading until September 2011. The fund has since incurred realized trading losses of more than $550,000 plus approximately $1,419,600 in unrealized losses through May 31, 2013. Meanwhile, bank records reveal that White has taken more than $1.7 million for himself, KGW Capital, and two of his other businesses, including approximately $248,600 in investor funds from Revelation Forex to fund an unrelated and undisclosed propane business and $97,000 on another business entitled KGW Real Estate. The SEC's complaint names both of these companies as relief defendants for the purpose of seeking disgorgement of investor funds in their possession.

The court has granted the SEC's request for an asset freeze and temporary restraining order against White, KGW Capital, Revelation Forex, and RFF GP LLC, which is the general partner of Revelation Forex. The court appointed Kelly Crawford as the receiver over these entities. A hearing has been scheduled for July 18, 2013, on the SEC's motion for a preliminary injunction.

The SEC's complaint alleges that White, KGW Capital, Revelation Forex, and RFF violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties as well as preliminary and permanent injunctions.

The SEC's investigation was conducted by B. David Fraser, Michael A. Umayam, Keith J. Hunter, and R. Joann Harris of the Fort Worth Regional Office. The litigation will be led by Janie L. Frank and Mr. Fraser. The SEC acknowledges the assistance of the CFTC, FBI, and Texas State Securities Board.

PONZI FOREIGN CURRENCY OPERATOR TO PAYBACK $2.69 MILLION

The following excerpt is from the CFTC website:

“Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent order requiring CFTC defendant Larry Benny Groover of Gunter, Texas, to pay a total of $2.69 million in restitution and a civil monetary penalty for defrauding customers and misappropriating funds in a foreign currency (forex) Ponzi scheme.

The consent order of permanent injunction, entered by Judge Richard A. Schell of the U.S. District Court for the Eastern District of Texas, Sherman Division, on January 4, 2012, also requires Groover and/or his wife, Joanne Groover, named as a Relief Defendant, to disgorge ill-gotten funds totaling $44,890, which Joanne Groover received as a result of her husband’s fraudulent conduct.

The court’s order finds that from June 18, 2008, to February 4, 2010, Groover solicited and received approximately $1.4 million to trade forex and commingled these customer funds with his and his wife’s personal funds. Groover used approximately $647,500 of the solicited funds to trade forex and lost approximately $600,000. Groover misappropriated the remaining customer funds by making payments to past customers with new customer funds and paying for personal expenses, such as health and medical care, cable television, groceries, dining, auto repair, gasoline, and insurance, according to the order. Additionally, the order finds that Groover used customer funds to purchase software and trade publications and to make payments directly to himself and Joanne Groover.
The CFTC thanks the Financial Services Authority of the United Kingdom, the Australian Securities and Investment Commission, the Texas State Securities Board, and the Collin County District Attorney’s Office for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Jeff Le Riche, Jenny Chapin, Jo Mettenburg, Steve Turley, Richard Glaser, and Richard Wagner.”