The Commodity Futures Trading Commission has sued Cash FX Group S.A., its chief executive and three other defendants, alleging they operated a multilevel marketing Ponzi scheme that took more than $950 million from the public for purported foreign-exchange trading and left participants with at least $406 million in losses.
The agency announced the civil enforcement action on Sept. 25 against Cash FX Group and CEO Huascar Jose Lopez Castillo, The Conversion Pros Inc. and CEO Ronald Pope, and Justin Halladay. According to the CFTC’s enforcement announcement, the defendants solicited money from participants, including people in the United States, on the representation that the funds would be used to trade retail foreign-currency contracts through a commodity pool.
The CFTC alleges participants were told that expert traders, proprietary algorithms and artificial intelligence would trade the pooled money and generate returns of as much as 15% a week. Instead, the regulator says Cash FX conducted only minimal forex trading and misappropriated nearly all participant funds.
According to the complaint described by the agency, money contributed by new participants was used to make payments presented as trading profits to other participants, while millions of dollars were paid to the defendants. Cash FX also allegedly issued false account statements intended to make the purported trading returns appear genuine. The allegations have not been adjudicated, and the filing does not itself establish liability.
The scale of the alleged losses is significant even relative to the amount raised. The CFTC says participants lost at least $406 million. Compared with the more than $950 million allegedly accepted by the operation, the stated minimum loss equals about 43% of the amount raised, an Investozora calculation based on the agency’s figures. The two numbers measure different things, however: the $950 million figure concerns funds allegedly solicited and accepted, while $406 million is the regulator’s stated minimum participant loss.
The federal lawsuit represents a major escalation from warnings that Cash FX had already received from financial regulators outside the United States. Britain’s Financial Conduct Authority warning on Cash FX Group was first published in December 2019 and said the firm was not authorized to provide or promote regulated financial services in the United Kingdom. Australia’s ASIC warning issued in October 2021 similarly said Cash FX was not licensed to provide financial services there and warned investors about its recruitment model and claimed investment returns.
Those earlier regulatory notices concerned authorization and investor risk; they did not establish the allegations now before the U.S. court. The new development is that the CFTC has brought a federal civil case alleging that the underlying operation itself constituted fraud and a Ponzi scheme.
The CFTC is asking the U.S. District Court for the Middle District of Florida to order restitution for affected participants, disgorgement of allegedly ill-gotten gains and civil monetary penalties. It is also seeking trading and registration bans and permanent injunctions against further violations of the Commodity Exchange Act and CFTC regulations.
What participants ultimately recover remains unresolved. The CFTC’s filing begins the litigation rather than resolving it, and the amount of any restitution, penalties or disgorgement would depend on subsequent court proceedings. For now, the $950 million scheme, the $406 million minimum loss and the alleged misuse of participant funds remain allegations the regulator will have to establish in court.
