Flashback: Infamous Forex Scams in History, Part 7.
As many readers who have been following our series on Forex scams are aware – the name Russell Cline has come up on more than one occasion.
Back in January 2007, one of our reporters, Samantha Samborsky, in her previous career incarnation, was working at the U.S. District Court and filed this first-hand report on Mr. Cline for the CFTC, which was later integrated into that agency’s formal complaint. The CFTC report was in turn picked up by major international press.
We reprint Ms.Samborsky’s report below with her permission:
Filed: January 11, 2007
A court order was imposed against Russell Cline of Portland, Oregon to pay back more than $33 million after being sued by the State of Oregan and the Commodity Futures Trading Commission.
Following an investigation, it was found that Cline was responsible for a major financial fraud. He was sued on May 7, 2003 for illegal activities which involved off-exchange trading in foreign currency futures and making personal use of investment funds.
Together, the State of Oregon Department of Consumer and Business Services, the CTFC (Commodity Futures Trading Commission), the FBI and the US Department of Justice, had entered a legal order for monetary sanctions against Cline. The final results were announced on January 11, 2007 by the Honorable Garr King on behalf of the State of Oregon.
Cline had set up his own financial company, which was registered as Orion International, Inc, and in 1998 he started using this business to run a financial fraud by encouraging customers to fund an investment plan that allowed Orion to purchase futures contracts and to trade options in forex (foreign currency exchanges). These options trades were actually illegal and the contracts were misleading in the way they reported the amount of risk involved and the amount of profits that could be expected.
This financial scam raised more than $40 million in funds from Orion’s customers. This money was supposed to be used for forex trading on behalf of customers, but much of it was used by Cline to purchase his own cars and homes and to pay for his entertainment.
Some of the fraudulently raised funds were used to pay the people who were willing to work for Cline and who knowingly took part in the fraud.
Cline also used more than $13 million, out of funds forwarded by customers for investment, to pay other customers who were supposed to have gained profits from his forex trades. Cline actually did use a small amount of the funds for financial trading, but he sustained more losses from his forex trades than he made in profits.
Cline created false accounts and provided customers with fake financial statements. The website he set up for Orion, featuring information about the investment opportunity, showed false information about market conditions and lied about the amount of trading profits. Faked balances then showed up in his customers’ online accounts and they were given excuses for the delay in receiving withdrawal requests from their accounts.
It was due to the efforts of the CFTC, working closely with the Office of the United States Attorney and the State of Oregon, which led to the successful prosecution against Cline and his company. In the civil action filed against him, Cline was charged with a total of 39 counts, including money laundering, wire fraud and mail fraud. He gave a guilty plea on one count of money laundering and two counts of mail fraud.
CFTC Director of Enforcement, Gregory Mocek, explained that all the organizations concerned in this case had been determined to see Cline found guilty. It was their hope that anyone considering a fraud involving forex would take note of the penalty imposed on Cline, so they would understand that getting caught for deceiving investors is not an attractive prospect.
On September 7, 2004 the district court imposed a permanent injunction against Cline, prohibiting him from doing any more forex trading in the State of Oregon. At the same time, the court imposed a civil penalty requiring him to repay all the funds that had been illegally obtained from his customers.
Court sanctions against all the defendants came to a total of almost $150 million. His confederates in the scam were ordered to repay more than $1.3 million. His three co-defendants in the case were April Duffy, Samantha B. Lewis (formerly known as Bangone Vorachith) and Nancy Hoy.
In the criminal action number CR-04-205-KI (US v Cline ) a judgment was entered on May 8, 2006 by D. Ore against Cline, for a civil penalty of $16,567,905. This was the amount he had personally obtained through fraud.
Cline was given a 97 months in prison for fraud and on June 16, 2006, a permanent injunction was entered against his company, Orion International, Inc, which froze all business assets. This final order from the State of Oregon directed Orion to return a total amount of $28,823,034 to its customers. A receiver was appointed to make these repayments from the assets recovered by the court. The company was also fined $86 million.
Additional References: Press Based On Above Original Report