Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Saturday, July 16, 2011

SEC Charges Forex Operator with Running Ponzi Scheme

The SEC filed fraud charges against Jeffery A. Lowrance, the CEO of First Capital Savings & Loan Ltd., a purported foreign currency trading firm, alleging he scammed hundreds of investors with false promises of high, fixed-rate returns while secretly using their money to fund his start-up alternative newspaper.  Lowrance, who had fled to Peru and was arrested there earlier this year, was arraigned on criminal fraud charges.  In addition, the Commodity Futures Trading Commission filed fraud charges Thursday against Lowrance and First Capital.

The SEC alleges that Lowrance raised approximately $21 million from investors in at least 26 states, by promising huge profits from a specialized foreign currency trading program. First Capital actually conducted little foreign currency trading, lost money on the little trading that it conducted, and never engaged in any profitable business operations. Lowrance targeted certain investors by purporting to share their Christian values and their limited-government political views.

According to the SEC’s complaint, filed in federal district court in San Jose, California, Lowrance and First Capital promised investors a “predictable monthly income,” with monthly returns up to 7.15 percent through foreign currency trading. Lowrance’s scheme began to unravel in June 2008 and Lowrance and First Capital had lost all of the investors’ money by September 2008. Nevertheless, Lowrance solicited at least an additional $1 million from at least 36 investors between June 2008 and February 2009 by continuing to tout First Capital’s fictitious high returns, the SEC alleged.

The SEC’s lawsuit seeks court orders prohibiting the defendants from engaging in securities fraud and requiring them to disgorge their ill-gotten gains and pay financial penalties.

http://lawprofessors.typepad.com/securities/2011/07/sec-charges-forex-operator-with-running-ponzi-scheme.html

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