A federal court in New York entered a default judgment on Friday against Queens-based firms Safety Capital Management Inc. and GNS Capital Inc., both doing business as ForexnPower, over a retail forex fraud scheme that targeted Korean-language speakers.
The U.S. District Court for the Eastern District of New York ordered the companies to pay $835,058 in restitution and $1,627,245 in civil monetary penalties, according to the CFTC. The combined sanctions total roughly $2.46M.
How the scheme worked
The US commodities regulator said in its complaint that the defendants solicited members of the Korean-speaking community in Queens to open and fund retail forex trading accounts. According to the CFTC, the firms misrepresented the safety and profitability of the investments while failing to register with the regulator as required.
The court found that the defendants deliberately exploited investors within their own community, the CFTC said.
The judgment was entered by default, meaning the defendants did not respond to the CFTC’s complaint or contest the allegations in court. No full merits trial took place.
The CFTC originally filed its enforcement action in the Eastern District of New York. After the defendants failed to appear, the court adopted the complaint’s factual allegations and imposed both restitution and civil penalties.
The order also permanently prohibits Safety Capital Management and GNS Capital from trading in any CFTC-regulated markets and from registering with the regulator.
Community-based solicitation under scrutiny
The case is one of several in recent years where US regulators have pursued retail trading operations that solicited investors through language-specific or community-based networks. The Queens location and Korean-language focus made ForexnPower’s operation domestic rather than offshore, placing it within the CFTC’s jurisdiction.
Ian McGinley, the CFTC’s Director of Enforcement, said the case “demonstrates the CFTC’s commitment to rooting out fraud that targets vulnerable communities.”
The permanent trading ban and registration bar are intended to prevent either entity from re-entering the regulated market.
