The Commodity Futures Trading Corporation has filed a case against a forex broker who solicited clients under false pretenses. The CFTC filed a complaint against Michael J. Salerno, an officer and agent of the forex entities Advanta Capital Markets, BDF Trading LP, and Black Diamond Forex LP for allegedly soliciting people to become retail traders without informing them of his past convictions for fraud. In addition, he advertised for positions in his companies — Trading Floor Manager and Forex Trader — through online job sites such as Indeed.com as well as on his company sites.
According to the CFTC complaint, the prospective traders were required to make a “risk capital deposit” ranging from $1,200 to $1,900, and around 150 prospective traders were hired. The traders were reportedly told in written and oral communications by Salerno that their deposits would be matched with funds at a multiple of usually around 10. The combined funds would reportedly be deposited in a live account set up for them with which they could use to trade. However, these accounts were never opened.
Many disaffected former traders have posted complaints against Black Diamond and its associated companies on job review sites such as Glassdoor, as well as on forex trader forums. These alleged violations were among the factors that prompted the CFTC to launch its investigation that led to the regulator filing the case at the Pennsylvania Eastern District Court.
More seriously, Salerno did not disclose his past convictions and indictments, including:
- A conviction in 2005 for failing to file the required payroll tax forms and paying to the IRS employment taxes in conjunction with a real estate investment firm he was operating. For these offences, he was sentenced to 21 months’ jail time and three years’ supervised release.
- A 2003 indictment by a federal grand jury. The 18-count indictment included charges that he had filed two false income tax returns, committed wire fraud, failed to provide proper accounting, and pay employment taxes.
In addition, although Salerno claimed in 2015 on the Black Diamond website that he had funded his venture with 10 million in real estate sales, he actually filed a Chapter 7 bankruptcy petition in May of the same year.
The CFTC has charged Salerno and his companies with fraud arising from retail forex transactions. They are asking the court to levy monetary penalties for each violation as well as moves for remedial ancillary relief including restitution and bans against registration and trading.