A lot of Forex trading scams involve tricking customers into thinking a platform is profitable when it really is not. One Forex trading scam that worked the opposite way was a fraudulent company called Global Forex Management, which swindled customers out of a collective $30 million. Let's take a closer look at this Forex scam and how it drained numerous victims of their funds.
How the Global Forex Management scam worked
Three people were charged with participating in this Forex trading scam:
- Patrick Gallagher of Middleborough, Massachusetts
- Michael Dion of Orlando, Florida
- Emade Echadi of the Netherlands
Together, these three criminals created a fraudulent Forex company called Global Forex Management.
Echadi, the scammer based in the Netherlands, also had a company, called IB Capital, which provided an online trading platform for the scheme.
Here is how the scam worked:
- Gallagher and Dion collaborated to attract investors to the Global Forex Management company.
- The two criminals created fake trading results to "prove" that their Forex techniques were profitable. Believing the fake evidence they were shown, the traders became confident in the company, and agreed to invest their funds.
- Dion and Gallagher pretended to invest the money through IB Capital's platform.
- In May 2012, Dion and Gallagher claimed that they had suffered a huge loss through legitimate trading, and that all the customers' funds were gone because of simple misfortune in the markets. To "prove" that this had occurred, they created fake records.
- Dion, Gallagher and Echadi simply stole the $30 million that they claimed their investors had lost in the markets.
Prior to claiming the "loss," the trio had set up shell companies in various countries. They used these shell companies to move the funds they stole.
Compared to a lot of Forex schemes that you have probably seen, this one was quite simple and straightforward.
Again, what happens a lot of the time is that scammers work to create a façade of profitability for many months, sometimes even years, all while pocketing their customers' funds (usually taking the form of a Ponzi scheme).
But in this case, the scammers ran a much shorter-term con, where they simply claimed false incompetence, and then tried to run with all the money all at once.
Were there red flags? Probably
With a shorter-term scam like this, it would probably have been harder for prospective investors to detect clues that something was wrong. But were there any warning signs?
Alas, it is now next to impossible to find any details about what tactics the scammers used to lure their victims in, aside from the false records of past trades. It is unknown if they claimed impossibly high returns, for example, or guaranteed wins.
The biggest giveaway would probably have been a lack of a genuine established history, had any prospective customers taken the time to dig into the company's background.
In any case, Global Forex Management was convincing enough that a lot of victims fell for it.
The sentence for the Global Forex Management criminals
In a September 2022 press release, the Department of Justice reported on the outcome of Gallagher and Dion's trial. A full decade after the theft took place, both criminals pleaded guilty to one count of conspiracy to commit securities fraud. DOJ wrote:
Each face a maximum penalty of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Alas, there were no further news updates regarding the sentence. So, it is unknown whether Gallagher and Dion received the full sentence or not.
What about Emad Echadi?
While most of the news posts regarding this case focus on Dion and Gallagher, Emad Echadi also faced prosecution.
Echadi's scam actually involved not only Global Forex Management, but some additional entities as well: Investment Intelligence Corporation, Kevin Clarke, Senen Pousa, and Bill Breame (sometimes called Bill Breen). All of these agents brought victims to Echadi. Clarke and Breame were also associated with Global Forex Management.
In 2015, the CFTC (Commodities Futures Trading Commission) went after Echadi and his partner Michael Geurkink at IB Capital. They found that they had been violating multiple rules, particularly with respect to how they were soliciting clients.
A court case took place in Texas in 2016. In October of that year, the judge assessed the following penalty against Echadi and Geurkink:
Defendants shall pay, jointly and severally, restitution in the amount of Thirty Five Million dollars ($35,000,000) ("Restitution Obligation"), plus post-judgment interest. Postjudgment interest shall accrue on the Restitution Obligation beginning on the date of entry of this Consent Order and shall be determined by using the Treasury Bill rate prevailing on the date of entry of this Consent Order pursuant to 28 U.S.C. § 1961 (2012).
The judge banned the pair from working with registered retail foreign exchange dealers (RFEDs) or from registering with the CFTC at any point in the future.
Look at the whole picture, not just the trading records
It is more difficult to offer some useful takeaways from this story because there are just not as many details available.
The main takeaway here would mostly be just to remember that while it is important to ask to see records of past trades, you cannot assume that all records you are shown are real.
Try to put the trading records a company shows you into a bigger picture. Here are some steps you can take:
- Look back at past market data to see if the records even make sense.
- Research the background and history of the company in as much depth as you can, and see if they are licensed or regulated in any way.
- If a company downplays the risk of investing in Forex or makes impossible promises, run. Forex trading is inherently risky, and there is always the possibility of losing money. Past returns do not guarantee future outcomes.
What you just read about the Global Forex Management scam should remind you to be cautious when pursuing new investment opportunities, even when you see records of past positive returns.
