Florida-Based Companies and Their Owner Settle Mid-Trial for $1.8…
Washington, D.C. — The Commodity Futures Trading Commission today announced the U.S. District Court for the Middle District of Florida entered an order for permanent injunction, monetary sanctions, and equitable relief against Alan Friedland of Florida and his Florida-based companies, Fintech Investment Group, Inc. (Fintech), and Compcoin LLC, for fraudulently soliciting customers to purchase a digital asset they falsely promised would allow customers to gain access to a proprietary foreign currency (forex) trading algorithm.
The order requires the defendants to pay $1,200,000 in restitution and a $600,000 civil monetary penalty. In addition, the order imposes a permanent ban on Friedland, Compcoin LLC, and Fintech from soliciting or trading in commodity interests or registering with the CFTC in any capacity.
The jury trial commenced on January 31, 2022. Without admitting or denying the allegations in the complaint, the defendants consented to settle on all claims during the CFTC’s presentation of its case, on the fourth day of trial.
“This matter demonstrates the CFTC will continue to focus on customer protection and vigorously litigate the cases it files to obtain appropriate relief,” said CFTC Acting Director of Enforcement Vincent McGonagle. “As required by the Commodity Exchange Act and CFTC regulations, commodity trading advisors must ensure they are providing accurate and complete information to potential customers so they can make informed decisions before entering into an advisory relationship.”
According to the order, which adopted the parties’ agreed findings of fact and conclusions of law, from approximately 2016 through 2018, Friedland and his companies fraudulently solicited customers and prospective customers to purchase a digital asset known as Compcoin. The defendants falsely promised, among other things, that Compcoin would allow customers to gain access to what they described as Fintech’s proprietary forex algorithmic trading program known as ART.
In solicitation materials, the defendants represented, among other things, that the ART trading algorithm was “complete in form and function,” and “ready for release on the open market.” The defendants also represented that “ART’s high success rate at predicting…forex trades, coupled with the high rate of return from these trades, will stimulate demand among investors and forex traders to purchase and use Compcoin—specifically to gain access to ART.”
As reflected in the order, the defendants knew that customers could not lawfully use ART until Fintech received approval of its disclosure documents from the National Futures Association (NFA). Nonetheless, the defendants offered Compcoin prior to Fintech seeking NFA approval of its disclosure documents. Although the defendants touted the successful performance of ART, they knew that its performance, which was referenced in solicitations, was based largely or entirely on hypothetical performance results and not real trading. The defendants also knew the Compcoin LLC website and solicitations did not contain the required disclaimer for simulated or hypothetical performance. Ultimately, the NFA did not approve Fintech’s risk disclosure statements, and purchasers of Compcoin never gained access to the supposedly highly profitable forex trading algorithm as promised. Instead, purchasers of Compcoin were left with a worthless digital asset.
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC thanks the NFA and the Financial Markets Authority of New Zealand for their assistance in this matter.
The Division of Enforcement staff members responsible for this action are Janine Gargiulo, Gabriella Geanuleas, Katherine Rasor, Jacob Mermelstein, Christopher Giglio, K. Brent Tomer, Lenel Hickson, and Manal M. Sultan.
The following CFTC staff members also provided assistance in this case: Patrick Daly (Division of Enforcement), David W. Oakland (Division of Enforcement), and Salma Mack (Division of Data).
CFTC’s Forex Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories and Articles that provide the warning signs of fraud, including the Foreign Currency (forex) Trading Fraud Advisory and the Customer Advisory on Digital Tokens.
The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the Commodity Exchange Act.