The Commodity Futures Trading Commission has filed charges against WorldWideMarkets, Ltd., TAB Networks, Inc., Thomas Plaut and Arthur Dembro for fraud and other violations.
Violations
According to the CFTC, the two firms operated a long-running scheme which defrauded retail forex investors around the world. This occurred between March 2012 and September 2018. During that time, WorldWideMarkets and TAB Networks acted as common enterprise under Plaut’s control. Dembro served as Chief Financial officer of both entities at the time and allegedly aided and abetted the fraud.
The US watchdog also stated that WorldWideMarkets ignored CFTC requirements for registration and customer-protection. It ultimately went defunct after misappropriating $4.7 million of investor money.
Acting Director of Enforcement Vincent McGonagle said:
This complaint underscores the critical importance of the CFTC’s registration requirements and that market participants comply with applicable customer protection regulations. It should come as no surprise that a company that avoided a requirement to maintain sufficient levels of adjusted net capital would become insolvent after operating in a Ponzi-like manner for years.
Background
According to the regulator’s complaint, from 2012 to 2018, WorldWideMarkets, along with TAB Networks who performed all of its business activities, participated in forex transactions with 14,000 retail customers.
During this period, the companies operated out of New Jersey. However, the CFTC discovered that Plaut organized WorldWideMarkets in the British Virgin Islands in order to evade US registration and customer protection regulations that apply to retail forex dealers.
The CFTC also stated that WorldWideMarkets failed to maintain sufficient levels of adjusted net capital. Moreover, the company failed to maintain assets equal to its retail forex obligation in a financial institution in a money center country. The entity falsely claimed to its customers it would hold their money “safely” in “segregated accounts.”
Additionally, CFTC discovered that WorldWideMarkets’ misappropriated $4.7 million from customers, perhaps even more. The firm improperly used customer assets to pay operating expenses, employee salaries and benefits, and to make cash distributions to Plaut.
The CFTC recently brought charges against Forex firm Denari Capital and owner in Pool Fraud case, resulting in a $4 million monetary penalty.
