SEC sues Alpha One foreign exchange scammers

On Tuesday the Securities and Exchange Commission reported that it had obtained an emergency court order to freeze the assets of Texas A&M finance professor Robert D. Watson, Houston lawyer and certified public accountant Daniel J. Petroski, and two firms. They are charged with defrauding U.S. investors by using forged bank records to make it appear they were earning spectacular returns in foreign exchange trading.

 

According to the complaint that was submitted to the federal court in Houston Watson and Petroski raised more than $19 million from investors and claimed they would earn profits through “Alpha One,” a foreign-currency trading software program purportedly owned by their firm PrivateFX Global One Ltd.

 

They claimed they would employ the services of 36 Holdings Ltd., a so-called “deal clearing company” owned and controlled by Watson. Watson and Petroski misrepresented to investors that it had millions of dollars in bank accounts in the U.S. and Switzerland and that their foreign exchange trading business had achieved an annual return of more than 23 percent since its inception and has never had a losing month, as reported in the SEC’s filing. According to the regulator’s allegations the defendants’ historical performance claims are not supported by valid financial records.

 

The complaint further says that when the SEC issued investigative subpoenas, Watson and Petroski produced phony records purporting to show that 36 Holdings held an account at Deutsche Bank, where it earned more than $2 million for Global One in 2009 by trading foreign currencies. In fact, 36 Holdings did not even have an account at Deutsche Bank. The SEC’s complaint also alleges that the defendants provided the Commission staff with phony bank statements from a Swiss bank and falsely claimed that 36 Holdings had almost $70 million on deposit there, including $11 million of Global One funds.

 

Among other things the SEC charges the defendants with the violation of the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition to emergency and interim relief that has been obtained, the SEC seeks a preliminary injunction and a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.

 

Responding to the motion where SEC asks for the emergency relief US District Judge Sim Lake entered a temporary restraining order, froze the defendants’ assets and appointed Thomas L. Taylor III of Houston as a receiver to marshal assets belonging to the defendants and affiliated entities.