K.E.L.'s Dwight Foster Convicted in $13M Forex Fraud

Contents

01

Facts Regarding the Fraud

02

Strategies For Conducting Ponzi Schemes

03

Legal Consequences

04

Relevant Cases

05

Conclusion

Judge Sean F. Cox of the U.S. District Court for the Eastern District of Michigan has convicted Dwight A. Foster and his firm, K.E.L. Enterprises, Inc., in a fraudulent Forex scheme that defrauded investors of $13 million. The court has ordered Foster and K.E.L. to jointly pay $4,548,390.51 in restitution, $803,126.83 in disgorgement, and a $1.6 million civil monetary penalty.

Facts Regarding the Fraud

Commodity Futures Trading Commission (CFTC) filed a complaint on June 28, 2023, which resulted in the conviction. The complaint disclosed that Foster and K.E.L. solicited $13,214,327.88 from 50 individuals to invest in a commodity pool they operated for trading in forex pairs and forex futures contracts.

However, Foster and K.E.L. did not invest the funds as pledged; rather, they deposited them into K.E.L.'s corporate accounts, which are under Foster's control. Foster later misappropriated these funds to cover his daily living expenditures, which included car loans, insurance, and credit card payments.

Strategies For Conducting Ponzi Schemes

Foster utilized a minimum of $8,665,937.37 in funds from new investors to distribute putative “profits” and redemptions to previous investors, in a manner that is synonymous with a Ponzi scheme. The fraudulent scheme's real nature was concealed by this misappropriation, which also created an illusion of profitability for the participants.

Legal Consequences

Foster and K.E.L. were previously served with a permanent injunction in 2023, which prohibited them from trading in any CFTC-regulated markets and from registering with the CFTC. K.E.L. was found to have acted as a commodity pool operator (CPO) without the requisite registration, and Foster was found to have acted as an associated person (AP) of a CPO without registration. Additionally, K.E.L. neglected to comply with the necessary disclosures and maintain books and records when necessary.

Relevant Cases

Fraudulent Forex schemes have been the subject of prosecution by the CFTC in the past. An example of this is the recent action taken by the CFTC when they filed a complaint against Three Bridges Trading Fund, LLC, and its owner, Donald Wray Rodgers, for running a fraudulent investment scheme worth $2 million, often known as a Ponzi scheme. Rodgers was responsible for soliciting and accepting funds from participants, misappropriating a significant portion of it, and issuing fraudulent accounts and trading statements to conceal the fraud. For wire fraud, he was sentenced to spend more than four years in prison.

In another significant case, a Miami federal court ordered ROFX and its co-defendants to pay over $225 million in restitution and penalties for a massive Forex fraud. The CFTCs complaint revealed that ROFX misappropriated over $57 million of customer funds under the pretense of forex trading with a highly successful automated trading robot.

Conclusion

The case against Dwight Foster and K.E.L. Enterprises underscores the severe repercussions of fraudulent Forex schemes as well. The restitution and penalties levied operate as a deterrent to other individuals contemplating involvement in such fraudulent conduct. By actively pursuing and penalizing those who violate commodity trading laws, the CFTC safeguards investors and preserves market integrity.