Never a losing day: CFTC alleges $950 million forex Ponzi scheme

The CFTC says a Panama-based forex pool collected over $950 million - and put less than one percent of it toward actual trading.

The Commodity Futures Trading Commission filed a complaint on September 24 alleging that Cash FX Group S.A. and four co-defendants operated what the agency calls a "fraudulent, multilevel marketing Ponzi scheme" that collected more than $950 million from over 400,000 accounts worldwide between June 2019 and December 2023.

Cash FX, incorporated in Panama in 2018, told participants their money would be pooled to trade foreign currency using professional traders, proprietary trading software, and artificial intelligence, according to the complaint filed in the US District Court for the Middle District of Florida. Some participants were promised returns of up to 15% per week, the filing says.

The CFTC alleges none of that was real. Cash FX conducted what the complaint calls "at most, de minimis forex trading" - meaning barely any trading at all - using less than one percent of participant funds for that purpose, the filing states. Instead, the agency says the operation funneled new participant money to pay earlier participants and distributed funds to the individual defendants for personal use.

The complaint also names The Conversion Pros, Inc. (TCP), a Nevada corporation that allegedly built the platform's back-office infrastructure - the system that logged contributions, calculated commissions, and processed withdrawals. The CFTC alleges TCP and its chief executive helped make the operation possible and independently profited from it.

According to the complaint, Cash FX's founder and chief executive controlled the bitcoin wallets that received participant funds. The filing alleges he retained at least $96 million of misappropriated pool participant funds for personal use, from at least $121 million that flowed to wallets he owned or controlled.

TCP's chief executive allegedly received at least $15.4 million in misappropriated funds through wallets he or TCP controlled, the complaint says. A third individual defendant, described in the complaint as a Florida-based promoter who led what Cash FX called its "Power Team" and had "an extensive online following," allegedly received at least $16 million.

The complaint describes what the CFTC characterizes as a scheme sustained by manufactured data. Cash FX's chief executive manually entered daily trade return rates into the back-office system, according to the filing, "providing no evidence or ability to verify whether such trading had actually occurred." Between July 2019 and July 2023, Cash FX "supposedly never had a losing day in the global forex markets," the complaint says - every single daily return entered was positive. The complaint also alleges return rates were routinely entered days in advance of the supposed trading dates.

Private messages cited in the complaint suggest TCP's chief executive saw the warning signs up close. In a January 2020 message, the filing says he wrote to Cash FX's chief executive: "I noticed you do not have any trade rates set for today and beyond. Just letting you know you might want to do that or it won't pay out [Trade Returns] today."

By February 2022, after a Facebook group presented evidence that TCP was being paid from wallets holding participant funds, TCP's chief executive allegedly responded: "Oh ya I know its all BS. I changed the wallets for payouts just to throw them off the trail," according to the complaint.

Cash FX also sent participants false account statements claiming they had earned commissions from forex trading, the complaint alleges - commissions the CFTC says did not reflect any actual trading activity.

When the operation struggled to meet withdrawal requests, certain defendants blamed supposed hacker attacks on the platform, the filing says. But when internal records showed it was Cash FX's chief executive's own account that had canceled withdrawals in January 2022, the complaint alleges he initially denied responsibility before later admitting he was the "admin" who had reversed them.

Financial regulators from at least 19 countries issued public warnings about Cash FX during the period covered by the complaint, according to the filing. The UK Financial Conduct Authority flagged the operation as early as December 2019, warning consumers to "beware of scams," the complaint says.

Approximately 81% of pool participants collectively lost at least $406 million, according to the complaint. More than 6,000 US-resident accounts contributed at least $27 million of the total.

The CFTC alleges none of the defendants were registered with the agency. Cash FX was legally dissolved in Panama in October 2022 but continued accepting deposits through at least May 2023, the complaint says, before taking down its website that October.

The agency is seeking court orders to stop the alleged conduct, along with financial penalties, the return of profits, repayment to affected participants, and bans on trading and registration. The complaint brings five counts, including fraud in connection with forex trading, fraud by an unregistered pool operator - essentially, running an investment pool without required federal registration - and failure to keep participant funds separate from personal accounts.

The allegations in this complaint have not been tested, and no court has ruled on the merits of the CFTC's claims.