The Commodity Futures Trading Commission (CFTC) announced today that Judge Sean F. Cox of the US District Court for the Eastern District of Michigan entered a supplemental consent order against Dwight A. Foster and his company KEL Enterprises, Inc.
The supplemental consent order requires Foster and KEL to pay, jointly and severally, $4,548,390.51 in restitution to fraud victims, $803,126.83 in disgorgement, and a $1.6 million civil monetary penalty in connection with a fraudulent forex program.
On July 18, 2023, the court entered an initial consent order of final injunction against Foster and KEL. The initial consent order imposed a permanent injunction against Foster and KEL and prohibited them from trading on any CFTC-regulated markets and from registering with the CFTC.
In addition, the original consent order found that from January 1, 2017 to July 3, 2023 (the relevant period), KEL acted as a Commodity Pool Operator (CPO) without registering with the CFTC as a CPO as required and Foster acted as an affiliate person (AP) of a CPO without having registered with the CFTC as an AP of a CPO, as required. Also, KEL failed to make disclosures and maintain books and records as the CPO is required to do.
The initial consent order and supplemental consent order resolve the CFTC Foster and KEL enforcement action.
The original and supplemental consent orders stem from the CFTC’s June 28, 2023 complaint. The original consent order found that, 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 join a commodity group managed by Foster and KEL for the purpose of trading commodity interests. including leveraged, margin or funding currency pairs with participants who were not eligible participants in contracts (retail forex) and forex futures contracts.
Instead of trading pool participants’ funds as promised, Foster and KEL embezzled all of the participants’ funds by depositing them directly into KEL’s corporate bank accounts, which Foster controlled, instead of depositing the funds directly into an account in his name pool to a futures dealer and/or retail forex dealer. Foster and KEL embezzled participants’ money 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 at least $8,665,937.37 of later participants’ funds to pay earlier participants purported “profits” and/or “buyouts” in the manner of a Ponzi scheme.
The CFTC cautions that orders requiring the return of funds to victims may not result in the recovery of any lost money because the offenders may not have sufficient funds or assets.