The US regulator, the Commodity Futures Trading Commission (CFTC), has continued its pursuit to bust financial scams and filed a civil enforcement action against two companies, WorldWideMarkets and TAB Networks for alleged forex fraud and other regulatory violations.
Announced on Tuesday, the lawsuit filed in a New Jersey court named the two key individuals of the companies, Thomas Plaut and Arthur Dembro. Plaut was controlling both the enterprises, while Dembro was the Chief Financial Officer at both companies.
A Long Running Scam
According to the complaint, both the companies operated the long-running scheme between March 2012 and September 2018, defrauding retail forex customers globally.
WorldWideMarkets allegedly acted as the counterparty of the Forex transactions with at least 14,000 retail customers during the course of its operations, while TAB Networks performed most of its business activities, the regulatory complaint detailed. The two companies were based and operated out of New Jersey, but Plaut registered WorldWideMarkets in the British Virgin Islands to evade taxes and strict US policies around customer protection.
The CFTC has brought multiple charges against the companies. It alleged that WorldWideMarkets did not maintain sufficient levels of adjusted net capital and failed to maintain assets equal to its retail forex obligation in a financial institution in a money center. Furthermore, it falsely represented to customers that their deposits were safe in a segregated account.
WorldWideMarkets has been alleged to have misappropriated at least $4.7 million in customer funds to pay operating expenses, employee salaries and benefits. Furthermore, Plaut directly benefited from cash distributions from the misappropriated customer funds.
“This complaint underscores the critical importance of the CFTC ‘s registration requirements and that market participants comply with applicable customer protection regulations,” Vincent McGonagle, the CFTC’s Acting Enforcement Director, said in a statement.
“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.”
