CFTC: CapitalStreet Financial ran a $1.3M Ponzi scheme

The Commodity Futures Trading Commission has charged CapitalStreet Financial LLC, a foreign exchange trading firm in Denver, N.C., with operating a Ponzi scheme in which at least 69 customers were allegedly bilked out of an estimated $1.3 million. The company was charged along with Sean F. Mescall, also of Denver, with misappropriating approximately $875,000 of customer funds to pay purported profits to customers and for their personal use. CapitalStreet and Mr. Mescall, who was identified as an “officer” of CapitalStreet in the CFTC complaint filed last week, provided customers with false monthly statements to conceal trading losses and misuse of customer funds, according to the CFTC. They also directed funds to “relief defendants” Gaincapital Inc. and Gerald Mescall, a relative of Sean Mescall, also of Denver, N.C. The CFTC is demanding that Gaincapital Inc. and Gerald Mescall repay the ill-gotten funds, but they are not charged with fraud. Judge Robert J. Conrad Jr. of the U.S. District Court for the Western District of North Carolina in Charlotte entered an order freezing the defendants’ and relief defendants’ assets on Sept. 9 — the same day the complaint was filed. A preliminary injunction hearing is now scheduled for Sep. 16. Calls to CapitalStreet were not returned, and no listing was found for Gaincapital. Gaincapital is not related to GAIN Capital Group LLC, a New York-based futures commission merchant. CapitalStreet is not related to Capital Street Financial Services Inc. of St. Paul, Minn.