Individual and Company charged with ongoing Forex and Commodity fraud
The Commodity Futures Trading Commission (CFTC) has issued an announcement to inform about the filling of a civil enforcement action against an individual and his Illinois limited liability company for ongoing Forex and Commodity fraud.
In accordance the announcement issued, the CFTC is filing of a civil enforcement action against Dro Kholamian of Barrington, Illinois, and his company, Blue Star Trading, LLC (Blue Star), an Illinois limited liability company with an office in Park Ridge, Illinois. The CFTC Complaint charges that the Defendants fraudulently solicited potential clients to trade leveraged off-exchange foreign currency (forex) and commodity futures contracts through accounts they would manage. The Defendants did not trade all of the clients’ funds as represented and, instead, misappropriated those funds. The CFTC Complaint also charges the Defendants with registration violations. Records indicate that Kholamian had an affinity in the Armenian community with at least some of the individuals.
Court Freezes Defendants’ Assets
On November 30, 2018, Judge Sara Ellis in the U. S. District Court for the Northern District of Illinois entered a Statutory Restraining Order freezing the assets of Kholamian and Blue Star, and prohibiting the destruction of their books and records. The parties agreed to a Consent Order for Preliminary Injunction which was entered by the Court on December 13, 2018. The Consent Order continues the relief set forth in the Statutory Restraining Order and prohibits the Defendants from further violations of the provisions of Commodity Exchange Act and its Regulations alleged in the Complaint.
Defendants’ Fraudulent Solicitation and Misappropriation
According to the Complaint, beginning in at least January 2013 and continuing to the present, the Defendants fraudulently solicited and accepted at least $775,000 from at least three individuals with whom Kholamian was acquainted through his local Armenian community, and overall possibly more than $1.9 million from more than 30 clients. Kholamian, a long-time commodity trader and former floor broker, claimed that he would manage individual trading accounts for clients to trade forex and commodity futures contracts, generating for them a 10-20 percent profit on a $25,000 investment within one year, and that clients could withdraw their funds at any time, without penalty. After his clients opened and funded their trading accounts, Kholamian assured them that that their investments were “doing well” and were on target to make the projected 20 percent return after one year. In fact, Kholamian did not trade on their behalf as promised. Instead, the Defendants misappropriated most of his clients’ funds, using those funds to pay personal expenses such as medical bills and business expenses, to make cash withdrawals and to pay other clients in the manner akin to a Ponzi scheme.
As part of his scheme, when clients demanded to withdraw their funds, Kholamian ignored their demands and lied about trading conditions that purportedly prevented him from making disbursements, claiming, for instance that he was “tied up in trades.” Eventually, when confronted with persistent demands from clients for the return of their money, Kholamian issued two $25,000 checks from his Blue Star bank account to clients, knowing that they could not be paid due to insufficient funds.
In its continuing litigation against the Defendants, the CFTC seeks full restitution to defrauded clients, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC Regulations, as charged.
CFTC Division of Enforcement staff members responsible for this action are Heather Dasso, Susan B. Padove, Elizabeth M. Streit and Scott R. Williamson.