Federal authorities have frozen the assets of a Clayton businessman who is accused of receiving funds from an alleged $35 million Ponzi scheme involving foreign currency exchange.
Bryan Coats and his firms Genesis Wealth Management, Coats Estates Planning Services and Coats Wealth Management were named in a complaint filed by the Commodity Futures Trading Commission last month in the U.S. District Court for the Western District of North Carolina.
Coats and two other defendants had their assets frozen this week. The order also prohibits the destruction of books and records.
Two other defendants had their assets frozen last month.
S. Frederick Winiker III, a Charlotte attorney representing Coats, said in a statement that his client was defrauded along with other investors in the scheme. Winiker said his client remains in touch with the U.S. Attorney’s Office.
The architect of the scheme was Keith F. Simmons of West Jefferson, N.C., according to the CFTC complaint.
Simmons was convicted of money laundering and fraud charges by a federal court in Charlotte in December. He is awaiting sentencing.
The other defendants in the case are Jonathan Davey of Newark, Ohio and Deanna and Lawrence Salazar of Yucca Valley, Calif. A total of eight corporate entities controlled by the defendants are named.
Deanna Salazar pled guilty to charges of investment fraud conspiracy and tax evasion in December. She's also awaiting sentencing.
The CFTC's complaint says that at least since April 2007 the defendants have accepted roughly $35 million from 240 or more individuals for a pooled investment.
Investors were told that the money was to be traded in an off-exchange foreign currency platform called Black Diamond. Such exchanges are subject to limited regulatory oversight, and have become a focus of federal fraud investigations in recent years.
The defendants are accused of misrepresenting the investment, and then committing fraud by not engaging in the currency trading.
They allegedly created fake promotional documents and false account statements, while using the money to pay for vehicles, real estate, lavish vacations, including a sky diving trip, maid services as well as to finance other side businesses.
When investors began asking for money in early 2009 the defendants allegedly made a series of excuses for why the payments couldn’t be made, including “claiming that a non-existent German liquidity provider by the name of Klaus would provide $120 million to Black Diamond to payout customers.”
Coats used his companies to solicit funds for Black Diamond beginning in late 2007, according to the complaint.
The CFTC is seeking restitution for the defrauded customers, and civil monetary penalties and permanent trading and registration bans for the defendants.
A copy of the latest CFTC release can be found here.