SEC v. Trevor G. Cook, Patrick J. Kiley, et al.

The Securities and Exchange Commission announced that on July 19, 2011, the U.S. Attorney's Office in Minnesota filed criminal charges against Jason Bo-Alan Beckman, Gerald Joseph Durand, and Patrick Joseph Kiley for their roles in a $194 million fraudulent foreign currency trading scheme orchestrated by Trevor Cook. The U.S. Attorney’s Office previously charged Cook and Christopher Pettengill for their involvement in the fraud. In August 2010, Cook entered a guilty plea to mail fraud and tax evasion and was sentenced to 25 years in prison and ordered to pay $155 million in restitution. On June 21, 2011, Pettengill agreed to plead guilty to securities fraud and awaits sentencing.

In November 2009, the SEC filed a civil injunctive action against Cook and Kiley and in March 2011, filed an injunctive action against Beckman. The SEC’s actions against these defendants, which were filed in the United States District Court for the District of Minnesota, arose out of the same facts that are the subject of the criminal case. The SEC’s complaints allege that from at least 2006 through 2009, Cook and Kiley with the help of Beckman and others raised at least $194 million from at least 1,000 investors through the unregistered offer and sale of investments in a purported foreign currency trading venture (the “Currency Program”). According to the SEC’s complaints, the defendants told investors that each investor’s money would be invested in the Currency Program, their money would be held in a segregated account, there was little or no risk to their money, they would receive guaranteed returns ranging from approximately 10% to 12% per year, and they could withdraw their money at any time. The SEC alleges that these representations were false. According to the SEC’s complaints, a significant portion of the investors’ funds were never invested in the Currency Program but instead were used to make purported interest and return of principal payments to other investors and also diverted to certain of the defendants and their companies. None of the funds were ever placed in segregated accounts at banks or foreign currency trading firms and the funds sent to the trading firms sustained significant losses.