September 25, 2015

CFTC Charges New York Corporations Safety Capital Management, Inc. and GNS Capital, Inc., both d/b/a FOREXNPOWER, and New York City Residents John Won, Sungmi Kang, and Tae Hung (“Kevin”) Kang with Fraudulently Soliciting More than $1.5 Million in a Forex Fraud Scheme

Defendants Sungmi Kang and John Won Are Also Charged with Misappropriation of over $622,000 of Customer Funds

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action in the U.S. District Court for the Eastern District of New York, charging Defendants Safety Capital Management, Inc. (Safety) and GNS Capital, Inc. (GNS), both doing business as FOREXNPOWER, John Won, a controlling person of GNS, and Sungmi Kang, a controlling person of both Safety and GNS, with, among other charges, fraudulent solicitation of over $1.5 million from customers to trade off-exchange foreign currency (forex) and misappropriation of over $622,000 of customer funds. Defendant Tae Hung Kang (a/k/a Kevin Kang), an officer and agent of Safety and GNS, is charged with fraudulent solicitation of customers.

The CFTC Complaint alleges that from at least October 2010 through December 2013, Safety and GNS fraudulently solicited and accepted over $1.5 million from over 90 retail customers to participate in a forex commodity pool and/or to open forex trading accounts managed by Safety or GNS.

Specifically, the Complaint alleges that Safety and GNS made material false representations in their solicitations of customers, including that (1) FOREXNPOWER had a “secret trading method” that guaranteed customers would obtain a “monthly profit rate of 10%,” (2) investors “will not lose their money at all, not even $1;” and (3) customers would make $100,000 with only a $500 investment.

Defendants solicited customers through advertisements in Korean language newspapers, on their website, in written solicitation materials, and at seminars in Queens, New York. The Complaint also alleges that Tae Hung Kang falsely represented that Safety and GNS had and would obtain 10% profits per month without any risk of loss; however, forex pool participants and retail forex customer accounts managed by the companies had never earned such profits and had in fact lost money.

In addition, the Complaint charges Safety, GNS, Won, and Sungmi Kang with commingling commodity pool funds with non-pool property, failing to operate a commodity pool as a separate entity, receiving pool participants’ funds in Safety or GNS’s name rather than in the name of the commodity pool, and failing to register Safety and GNS with the CFTC as Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs), as required. The Complaint also charges that GNS and Won with failing to produce documents at the request of CFTC staff made after GNS had become registered as a CPO and a CTA.

In its continuing litigation, the CFTC seeks, among other relief, restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations by the Defendants of the federal commodities laws, as charged.

CFTC Division of Enforcement staff members responsible for this case are Linda Y. Peng, W. Derek Shakabpa, Christopher Giglio, David Acevedo, David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.

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CFTC’s Foreign Currency (Forex) Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online. 

Media Contact
Dennis Holden
202-418-5088
 

Last Updated: September 25, 2015