Article

Note: The U.S. Commodity Futures Trading Commission (CFTC) sued Gordon Vandeveld and several others under the Commodity Exchange Act (the Act) for making material misrepresentations to potential and actual investors of FxTrade, a company, regarding foreign currency futures contracts.

Among other misrepresentations, Vandeveld told potential and actual investors that their investments would be "guaranteed by a standby letter of credit." Vandeveld solicited sixteen investors and, as a result of his misrepresentations, four invested a total of US$576,000. The United States District Court for the Western District of Tennessee, Western Division, Donald, J., entered judgment against Vandeveld, ordered restitution, entered a permanent ban against commodity trading, and assessed penalties of US$1,920,000.

The court concluded that Vandeveld committed fraud. It ruled that "Vandeveld made misrepresentations, misleading statements and deceptive omissions in his dealings with investors and potential investors. Vandeveld overemphasized the profit potential and downplayed the risk of loss to investors and potential investors. He made misleading statements regarding the extraordinary rates of return investors would receive. He guaranteed investors that FxTrade would pay them monthly returns ranging between three and seven percent a month (thirty-six to eighty-four percent annually). Vandeveld deceived investors about the existence of the standby LC which purportedly made the investment risk free. Furthermore, Vandeveld knew as early as February 22, 2004 that FxTrade had yet to obtain a single SLC for any of his clients yet he continued to solicit investors for FxTrade. Vandeveld also failed to disclose FxTrade and Mischler's unsuccessful trading record. Furthermore, he attempted to bolster FxTrade's credibility with false statements about the company. Vandeveld told investors and potential investors that as of January 13, 2004, FxTrade was regulated by the CFTC, had been in operation for three years and had 360 investors. In reality, FxTrade was never registered with the CFTC; had been in operation for six months; and had only nine investors during its entire operation."

[JEB/adk]

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