by Bill Singer
Texas Man Pleads Guilty in Criminal Forex Ponzi Scheme
June 9, 2010Let's start with some basic facts: Ray M. White was never registered with the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC). In fact, White was never registered to sell securities anywhere. Also, in 2003 and 2006 he filed for bankruptcy.
Knowing what you know about Mr. White, lemme ask you a question -- you gonna pull out yer checkbook and write him a big, fat one for his can't-lose FOREX trading program with promised annual returns of between 200 and 400 or so percent?
Hey, before you hurt yourself laughing, how about you control those chuckles and read on. It isn't all that funny. Really.
CFTC Complaint
In a CFTC Complaint, the regulator charged that as early as November 2006, Defendant Ray M. White and Defendant CRW fraudulently told prospective investors that CRW would pool their funds and trade FOREX on their behalf, claiming that CRW would generate tremendous returns for investors of between five and eight percent weekly, or an annual return equivalent of between 260 and 416 percent.
SEC Complaint
Separately, the SEC alleged in its own Complaint that Defendant Ray White and Defendant CRW engaged in a fraudulent Ponzi scheme raising at least $10.9 million from approximately 250 investors in at least 22 states. Acting on behalf of CRW, Ray White promised investors that their money would be pooled into a "fund" and that they would receive profits from a lucrative foreign-currency trading program that he operated through CRW. Ray White led investors to believe that his special expertise at trading foreign currencies (FOREX) would yield exceptional returns. He claimed to achieve returns from 6.3% to 8.1% per week.
FOREX --fuggedaboudit
In reality, Ray White was not a successful foreign-currency trader, and he had no lucrative foreign-currency trading fund or program. Indeed, as I noted at the beginning of this article, he filed for bankruptcy in 2003 and in 2006, a fact he concealed from his investors. Oops!
In the early stages of White's scheme, he sent certain investors account statements purporting to reflect the performance of their investments --- some statements showed monthly returns of over 30%, which. White claimed he generated by trading FOREX overnight. Impressed by the purported returns, early investors informed their friends and family members, some of whom subsequently invested with the Defendants. In reality, Ray White had simply fabricated the account statements, and his claims of high monthly returns were bogus. Of the approximately $10.9 million raised, White and CRW traded FOREX with approximately $93,900, and these trades were ultimately unsuccessful and resulted in the loss of nearly all of that five-figure sum.
Lifestyles of the Rich and Infamous
As to the nearly $10 million that they didn't lose in FOREX, the Defendants spent, transferred, and otherwise disposed of investor funds in a manner contrary to their investor promises. For example, the Defendants made approximately $4.5 million in Ponzi payments to investors to create the illusion that their investments were profitable. Some investors received more money from the Defendants than they had invested with the Defendants. Most investors, however, received either no payments or payments amounting to less than their investments with the Defendants. In addition, included in the Defendants' misappropriation and misapplication ofinvestor funds are payments of at least the following amounts:
A. Payments to Ray White: $177,251.98
B. Purchase of Ray White's House: $164,000.00
C. Purchase of Real Property near Tyler Texas: $205,595.00
D. Payments to Christopher White: $81,590.35
E. Purchase of Vehicle for Christopher White: $59,062.29
F. Payments for Car-Racing Activities: $431,660.31
G. Purchase of Other Vehicles: $73,088.42
H. Payments for Hurricane Motorsports: $127,000.00
I. Payments to Third Parties: $3,472,661.70
The SEC Complaint named:
The SEC Defendants:
- CRW Management, L.P. ("CRW") is a Texas-registered limited partnership located in Mansfield, Texas. Ray M. White is CRW's general partner and controls its operations.
- Ray M. White ("Ray White"), aged 50, resides in Mansfield, Texas.
The SEC Relief Defendants:
- Christopher R. White ("Christopher White"), aged 22, resides in Mansfield, Texas, and is Defendant Ray White's son. Christopher White improperly received funds and assets from investor funds.
- Hurricane Motorsports, L.L.C. ("Hurricane Motorsports") is a Texas-registered limited liability company located in Arlington, Texas. Ray White and Christopher White co-manage Hurricane Motorsports, which is purportedly in the business of building and selling kit-based sports cars.
The SEC Complaint further seeks permanent injunctions, disgorgement together with prejudgment interest, and civil penalties, and alleges that White and CRW violated the
- anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and
- the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act.
Asset Freeze
On March 4, 2009, U.S. District Judge Ed Kinkeade, for the Northern District of Texas, Dallas Division, appointed a receiver and froze the assets of the defendants and relief defendants, and appointed a receiver to recover and conserve assets for the benefit of defrauded investors.
Criminal Plea June 8, 2010
On June 8, 2010, U.S. Attorney James T. Jacks of the Northern District of Texas and Assistant Attorney General Lanny A. Breuer of the Criminal Division, announced that Ray M. White, 51, pleaded guilty before U.S. Magistrate Judge Paul D. Stickney to a criminal information charging one count of commodities fraud. Ray White faces a maximum statutory sentence of 10 years in prison, a $1 million fine, and restitution, and is scheduled to be sentenced by U.S. District Judge Barbara M.G. Lynn on September 17, 2010.
Ray White admitted that, in July 2008, he contracted with an investor to sell $50,000 in commodities through CRW Management LP. White admitted that, from July 2008 until January 2009, he knowingly and willfully cheated and defrauded, made false statements to, and deceived the investor by making several misrepresentations in connection with the contract to sell commodities.
White represented to the investor that his funds would be used to trade off-exchange foreign currency contracts (forex) and that CRW averaged a 7% per week returns through forex trading. He provided written account statements showing purported returns, and represented to this investor that CRW would maintain separate bank accounts for each investor. These account statements were false, and White did not maintain separate bank accounts for the investors.
The vast majority of the funds were never used to trade forex; White admitted to either misappropriating investor funds or paying them to other investors in the form of Ponzi payments. White admitted losing more than $86,500 on forex trading, in sharp contrast to the 7% per week profits he claimed.
For Further Reading:
Securities and Exchange Commission v. Ray M. White and CRW Management, L.P., (Civil Action No. 3-09CV0407-K (U.S.D.C./N.D. Texas, Dallas Division) / Litigation Release No. 20925 / March 5, 2009)http://www.sec.gov/litigation/complaints/2009/comp20925.pdf
Commodities Futures Trading Commission v. Ray M. White and CRW Management, L.P., (Civil Action No. 3-09CV0407-K (U.S.D.C./N.D. Texas, Dallas Division)http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfcrwcomplaint03042009.pdf
http://www.sec.gov/litigation/complaints/2009/comp20925-tro.pdf (EXPARTE ORDER FREEZING ASSETS AND GRANTING TRO AND OTHER EMERGENCY RELIEF / March 4, 2009 Asset Freeze) http://www.sec.gov/litigation/complaints/2009/comp20925-tro.pdf
Criminal Plea: http://www.justice.gov/usao/txn/PressRel10/white_ray_ple_pr.html