CFTC sues Cash FX Group, executives in alleged $950 million forex Ponzi scheme

The Commodity Futures Trading Commission said Friday that it has filed a federal court complaint accusing Cash FX Group S.A., its CEO and three other defendants of running a multilevel marketing Ponzi scheme that fraudulently raised more than $950 million for supposed foreign exchange trading. The agency said participants lost at least $406 million.

In a civil enforcement action filed in the U.S. District Court for the Middle District of Florida, the CFTC alleged that Cash FX Group, Huascar Jose Lopez Castillo, identified by the agency as Cash FX’s CEO and “of Brazil,” The Conversion Pros, Inc., Ronald Pope, identified as CEO of The Conversion Pros and “of Oregon,” and Justin Halladay, identified as “of Florida,” violated the Commodity Exchange Act and CFTC regulations.

According to the complaint, the defendants solicited and accepted money from the public, including people in the United States, by telling participants their funds would be used to trade retail foreign currency contracts through a commodity pool, an investment vehicle that combines customer money for trading. The CFTC alleged that the pitch relied on claims that expert traders, proprietary algorithms and artificial intelligence would generate returns of as much as 15% per week.

The agency said those representations were false. According to the CFTC, Cash FX conducted minimal forex trading and instead misappropriated nearly all participant funds. The complaint alleges that money from newer participants was used to pay fictitious trading profits to earlier participants, a hallmark of a Ponzi scheme, while millions of dollars were paid to each defendant.

The CFTC also alleged that Cash FX sent participants false account statements to make it appear their trading activity and profits were real, helping keep the scheme going. The agency’s stated loss figure — at least $406 million — is separate from its allegation that more than $950 million was solicited and accepted overall.

The CFTC said it is seeking restitution for participants, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and a permanent injunction.

“The Division of Enforcement has continued to refocus on its core mission of protecting the public from fraud and manipulation. This critical action, and the massive fraud it targets, reflects our steadfast commitment to addressing fraud wherever we find it,” David I. Miller, the CFTC’s director of enforcement, said in the agency’s announcement.

The U.S. filing marks a major civil enforcement step against a business that had already drawn warnings from regulators in several countries. The U.K. Financial Conduct Authority placed Cash FX Group on its warning list in a notice first published Nov. 12, 2019, saying the firm was not authorized. Panama’s Superintendencia del Mercado de Valores said in a Sept. 1, 2020, public communication that Cash FX Group S.A. was not licensed or registered there to conduct market activities. Canadian provincial regulators, including Saskatchewan’s Financial and Consumer Affairs Authority, also issued investor alerts in 2020 and 2021.

Those earlier warnings did not carry the same weight as the CFTC’s federal court action, but they showed that questions about Cash FX’s operations had been raised across multiple jurisdictions years before the U.S. complaint was filed.