Unregistered Michigan Pool Operator and its President Fined Over $13 Million for Multimillion-dollar Forex Fraud

The U.S. Commodity Futures Trading Commission (CFTC) announced on July 2 that Judge Sean F. Cox of the U.S. District Court for the Eastern District of Michigan entered a supplemental consent order against Dwight A. Foster and his firm K.E.L. Enterprises, Inc.

The supplemental consent order requires Foster and KEL to pay, jointly and severally, $4,548,390.51 in restitution to defrauded victims, $803,126.83 in disgorgement, and a $1.6 million civil monetary penalty in connection with a fraudulent foreign currency (forex) scheme. 

On July 18, 2023, the court entered an initial consent order of permanent injunction against Foster and KEL. The initial consent order imposed a permanent injunction against Foster and KEL and banned them from trading in any CFTC-regulated markets and registering with the CFTC.

Additionally, the initial consent order found from January 1, 2017, to July 3, 2023 (the relevant period), KEL acted as a commodity pool operator (CPO) without being registered with the CFTC as a CPO as required, and Foster acted as an associated person (AP) of a CPO without being registered with the CFTC as an AP of a CPO as required. Also, KEL failed to make disclosures and maintain books and records as a CPO is required to do.

During the relevant period, Foster and KEL engaged in a multimillion-dollar fraudulent scheme through which they solicited $13,214,327.88 from 50 people to participate in a commodity pool operated by Foster and KEL for the purpose of trading in commodity interests, including forex pairs on a leveraged, margined, or financed basis with participants who were not eligible contract participants (retail forex) and forex futures contracts.

Instead of trading pool participants’ funds as promised, Foster and KEL misappropriated all of the pool participants’ funds by depositing them directly into KEL’s corporate bank accounts, which Foster controlled, rather than depositing the funds directly into an account in the name of the pool at a futures commission merchant and/or a retail foreign exchange dealer. 

Foster and KEL misappropriated the participants’ funds to pay Foster’s personal expenses, including, but not limited to, a car loan, insurance, credit card payments, and other daily living expenses. Additionally, Foster used not less than $8,665,937.37 of later-in-time participants’ funds to pay earlier-in-time participants purported “profits” and/or “redemptions” in the manner of a Ponzi scheme.

The initial consent order and supplemental consent order resolve the CFTC’s enforcement action against Foster and KEL.