Release: 5421-07

For Release: December 12, 2007

Tennessee Court Finds Fraud and Imposes More Than $9.9 Million in Sanctions against Tennessee Forex Firm FxTrade Financial and its Principals and Salespersons in CFTC Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced today Judge Bernice B. Donald of the U.S. District Court for the Western District of Tennessee issued a decision against Gordon Jack Vandeveld, of Glenview, Illinois and a broker with Tennessee firm FxTrade Financial, LLC (FxTrade), finding that he committed foreign currency (forex) futures fraud.

The court also issued an order of default judgment and permanent injunction against: FxTrade; FxTrade principal Jeffrey A. Mischler of Germantown, Tennessee; FxTrade brokers Mary Jo Sibbitt of Glen Ellyn, Illinois; Ernst H. Behr of Denver, Colorado; and Reverie LLC of Glen Ellyn, Illinois. The court had earlier entered an order of default judgment and permanent injunction against FxTrade principal and broker Lee N. Romano II of Union, Illinois, after he failed to participate in the pretrial process.

With issuance of these orders, the defendants in this CFTC anti-fraud forex action were ordered to pay collectively $9,946,000 in monetary sanctions, which includes $9,120,000 in civil monetary penalties and $826,000, jointly and severally, in restitution to defrauded customers.

The order against Vandeveld imposes a $1,920,000 civil penalty and permanently bars him from any commodity-related activity, and imposes more than $406,000 in restitution to be paid, jointly and severally, with FxTrade, Mischler, Sibbitt, Behr, Reverie LLC, and Romano.

The default judgment orders, in addition to prohibiting the defaulting defendants from engaging in any commodity-related activity, also require them to pay restitution to FxTrade’s defrauded investors in the amount of $826,500 and impose civil penalties against FxTrade and Mischler of $2,640,000 each, Sibbitt $720,000, Behr $360,000, Reverie $480,000, and Romano $360,000.

Court Orders Stem from CFTC Anti-Fraud Action Filed in 2004

The orders stem from a CFTC enforcement action filed on March 17, 2004, and amended on September 13, 2004 (see CFTC Press Releases 4904-04, March 23, 2004 and 4993-04, September 20, 2004).

Vandeveld’s Fraudulent Conduct Resulted in Losses by All Customers

Vandeveld was the only defendant against whom the case proceeded to trial. At trial, prosecutors introduced evidence that showed Vandeveld brought four investors to FxTrade, and those investors lost most of their money. Three of those investors and two potential FxTrade investors testified at trial. According to investor testimony, Vandeveld made false statements regarding the extraordinary rates of return investors would receive and the existence of a standby letter of credit that purportedly made the investment risk-free. Evidence at trial also demonstrated that Vandeveld falsely represented that he and his wife had invested in FxTrade, how long FxTrade had been in operation, and the total number of investors.

Based on the evidence presented at trial, the court found that the transactions at issue were futures transactions within the CFTC’s jurisdiction and not spot transactions. The court further found that Vandeveld “made material misrepresentations and omissions to investors and potential investors that he knew were false and would most likely cause harm.”

On November 21, 2007, Vandeveld appealed the District Court’s order to the U.S. Court of Appeals for the Sixth Circuit.

The following CFTC Division of Enforcement staff were responsible for this case: Charles D. Marvine, Rachel A. Hayes, Lacey Dingman, and Rick Glaser.

Media Contacts
Ianthe Zabel
202-418-5080

Dennis Holden
202-418-5088

Last Updated: December 11, 2007