While looking for automated Forex investment platform, you might have stumbled upon ROFX between January 2018 and September 2021. Hopefully, you were not enticed by the website's claims of "guaranteed" coverage of losses, and ran the other way. ROFX defrauded customers of over $57 million collectively before being shut down.
In 2024, a Florida court ordered the scammers to pay over $225 million. Let's take a deeper look at this case and what it can teach us about avoiding Forex scams.
What was ROFX?
ROFX was the name of a Forex trading website (specifically, it was located at ROFX.net). The website claimed that it would trade customers' funds using an automated trading robot.
That was not what actually happened, however. The scammers running the operation simply stole the funds that customers invested in the platform.
Customers in the USA as well as other countries around the world fell for the ROFX scam.
Who was involved in the ROFX scam?
There were a total of nine defendants involved in this case. These consisted of five companies and four individuals:
- Jase Davis from Brandon, Mississippi
- Borys Konovalenko from Ukraine
- Anna Shymko from Duluth, Georgia
- Alla Skala from Grand Island, New York and Fort Erie, Canada
- Easy Com LLC, a New Hampshire company, doing business as ROFX
- Global E-Advantages LLC (Kickmagic LLC), a Delaware company, doing business as ROFX
- Grovee LLC, another Delaware company, doing business as ROFX
- Notus LLC, a Colorado company, doing business as ROFX
- Shopostar LLC, a one more Colorado company, doing business as ROFX
In addition, one Timothy Stubbs was also charged. Stubbs worked as a public accountant, and was a resident of Georgia.
As you can see, this scam involved quite a few collaborating parties and moving parts. But it was simple in its essence, as we will discuss below.
How did the ROFX scam work?
While the ROFX scam was active, customers would visit the platform's website, where they would learn about what seemed to be a promising product.
ROFX told customers that they would be using an automated trading bot with an established track record of success to trade their funds.
One of the things ROFX claimed was that if customers lost funds, there would be "guaranteed coverage" of those losses. Apparently this claim was convincing to customers, even though it did not make any sense (more about that later). 1,100 customers signed up for accounts, and used check or wire to make their deposits.
None of the funds were actually traded. Instead, the scammers outright stole the money, redirecting it to "non-trading corporate entities" based in Thailand, Poland, and other countries.
By the time authorities caught up with the ROFX scammers, they worried that the scammers might already have spent too much money to be able to pay back in full what they stole from their victims.
The judgment and sentence for the ROFX Scammers
It took a couple of years to bring justice to the ROFX scammers. The CFTC announced the charges in January 2022.
In this notice, the CFTC stated that the US District Court of the Southern District of Florida was filing a civil enforcement action against the nine defendants:
The CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and permanent injunctions against further violations of the Commodity Exchange Act and CFTC regulations, as charged.
The complaint also alleges that the companies acted as futures commission merchants by doing business as ROFX, soliciting or accepting orders for retail Forex transactions via the ROFX website, and accepting funds in or in connection with such transactions without being registered with the CFTC.
An update from the CFTC published on May 14, 2024, announced the sentence against the nine defendants in the ROFX case. The court ordered them to pay more than $225 million in restitution.
The court also made a ruling against Stubbs (the accountant), ordering him to pay a civil monetary penalty of $314,000, along with $153,000 in restitution.
What can be learnt from the ROFX scam
It can be easy to judge people who fall for a scam from the outside. But the 1,100 customers who collectively lost over $57 million to the ROFX scam were ordinary people. They made a foolish, costly decision, but that does not mean that they were foolish people in general.
Scammers prey on desperation. People who invested in ROFX allowed their emotions to blind them to the red flags in front of them.
The most prominent of those red flags was the "guaranteed coverage" of losses. Think about how little sense that would make. If a company were to cover the losses of all of its investors, where exactly would it be getting that money from? Clearly, it would not be trading profitably, so it would not be able to afford that kind of protection for its customers.
There is no such thing as a risk-free investment. Every Forex trade carries the possibility of loss, and no one else is going to assume that loss for you.
In fact, SEC Rule 156 governs investment company sales literature in the US. It forbids:
(B) Representations implying that future gain or income may be inferred from or predicted based on past investment performance; or
(C) Portrayals of past performance, made in a manner which would imply that gains or income realized in the past would be repeated in the future.
That is why so many investment companies state somewhere in their sales materials: "Past performance does not guarantee future results."
If you run into a company that not only fails to state that, but says the opposite, you are looking at a scam.
That was the case with ROFX. The scammers pointed toward a fictitious history of profitable results and told customers that any losses they had would be covered.
It was quite tricky, when you think about it. The ROFX scammers knew better than to claim that their past performance guaranteed that all their trades would win. So instead, they just found an indirect way to make a similar claim. They stated that some trades might lose, but that their customers would never lose money.
ROFX was not registered with the CFTC, or even registered to do business in the US in general. So, not only did they find an indirect way to break SEC rules, but they also were doing business illegally altogether — another red flag.
Key takeaways
Based on everything discussed, here are a couple of tips to avoid being taken in by Forex scams similar to ROFX:
- Check if the company you want to trade with is registered to legally do business in your country, and if it is registered with your country's relevant regulatory agencies.
- Look for clear language that states that past performance does not guarantee future results.
- Do not believe a company that claims that your losses will be "covered."
If you do not send funds to companies that exhibit any of those red flags, you will be well on your way to avoiding being scammed by the next ROFX.
