At the end of previous week (September 11, 2020) the Commodity Futures Trading Commission (CFTC) has reported important historical news – the victims of New York “Ponzi scheme” are being returned over 1 billion US dollars, which is 100% of all the approved requirements of the investors.

The “Ponzi scheme” case began in 2009 when the CFTC filed a lawsuit in the U.S. District Court against investors’ misappropriated funds.  For many years, the CFTC, with all the necessary powers of a financial regulator, with the United States Securities and Exchange Commission (US SEC) and in cooperation with law enforcement, defended the rights of affected citizens and sought opportunities to recover lost funds.

This case is an example of the effective work of financial regulators and law enforcement officers, who have the right to take all necessary measures to protect the rights of investors in their market, to detect fraudulent schemes and to conduct activities to prevent the creation of such financial pyramids.

Unfortunately, in Ukraine due to ineffective legislation that does not meet international standards, the financial regulator does not have effective mechanisms to prevent fraud in the financial market and the ability to return money to Ukrainian citizens, which is to receive and exchange banking and other information about the activities of fraudsters with law enforcement and foreign financial regulators, to block accounts until the court decision on the merits of the case, to support prosecutors in court proceedings, etc.

In Ukraine, financial pyramids are quite common and painful phenomenon. After all, the lack of proper control over the financial activities of companies creates free conditions for market abuse.

Today we have a vivid example of fraud with the B2B Jewelry project and Arkada Bank, where there are many affected investors and law enforcement bodies have initiated cases.

The activity of B2B Jewelry is compared to the “Ponzi scheme”.  Despite the sale of so-called “certificates”, B2B Jewelry does not officially provide financial services and does not fall under the supervision of state financial regulators of Ukraine, whose powers are quite limited.

We are witnesses of  the results of such financial abuses and have a large number of citizens who have lost their own funds due to the activities of such dubious companies.  In order to prevent such large-scale financial manipulations and to detect unfair activities of certain funds, there should be established all necessary opportunities and rights of the country’s financial regulator

Due to the lack of identification and the relevant authority to establish it, the NSSMC cannot take administrative measures to respond appropriately to fraudulent activities.

“Today fraud and misuse of funds was and remains the main problem for the financial market of our country.  The NSSMC monitors and records a very significant number of such schemes in the country, and the losses of citizens reach hundreds of millions and sometimes billions of hryvnias. Protection of these citizens is the main goal of our state, and only a strong regulator, whose rights are not limited, can deal with this issue”, – Timur Khromaev, Chairman of the NSSMC, said.

Currently a draft Law is being prepared that will completely change the status of the Ukrainian market to one that will become completely unacceptable for scammers.  The measures that will be reflected in the draft have been developed in accordance with the principles of the International Organization of Securities Commissions (IOSCO).  The powers to identify financial pyramids should guarantee the timely protection of investors of any instruments in the financial market.

The draft should include new opportunities for the regulator to cooperate with law enforcement bodies, to freeze money and assets, to have access and to perform information exchange with foreign regulators in order to use their ability to recover money from other jurisdictions.

The Commission urges citizens to be cautious and carefully assess the risks before investing their money!

Do you want to invest consciously? Take a look at our recommendations “10 Signs of fictitious investment project”.

Reference information on the “Ponzi scheme” case:

In 2009 the CFTC filed a lawsuit in the U.S. District Court and accused Paul Greenwood and Stephen Walsh of misappropriating funds through Westridge Capital Management and Trading Investors, LP., which they owned.

The case stated that between 1996 and 2009, Walsh and Greenwood fraudulently received about $1.3 billion from individuals and entities through their own companies and other organizations. They falsely assured their investors that all their funds would be used in a single index arbitration investment strategy. To hide the misappropriation of funds, Greenwood and Walsh made promissory notes to show that the participants’ funds were borrowed.

Walsh and Greenwood have misappropriated about $ 553 million from the fund.  More than $ 160 million was used for their personal needs, including the purchase of rare books, horses, teddy bears for $ 80,000 and living in a 3 million dollar residence for Walsh’s ex-wife.

Their company offered clients assistance in investing funds, promising huge profits that no one received as a result, and the company’s investors lost billions of dollars.

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