The Securities and Exchange Commission has charged Kevin White, owner of Texas-based KGW Capital Management, with defrauding investors in a foreign currency exchange trading scheme, taking more than $7.1 million of investor money by touting a sophisticated low-risk forex trading strategy in order to pay personal expenses, trips and undisclosed businesses and investments.
The SEC alleges that White and his companies used websites, press releases, and presentations to prospective investors to solicit funds. White and his companies told investors that Revelation Forex was a $1 billion hedge fund that had achieved total returns of more than 393 per cent since its January 2009 inception, and earned a compound annual rate of return of more than 36 per cent. Marketing materials provided to prospective investors boasted that an initial investment of $250,000 in Revelation Forex in January 2009 would have grown to $983,111 by May 2013.
Meanwhile, bank records reveal that White took more than $1.7 million for himself, KGW Capital, and two of his other businesses, including approximately $248,600 in investor funds from Revelation Forex to fund an unrelated and undisclosed propane business and $97,000 on another business entitled KGW Real Estate. The SEC's complaint names both of these companies as relief defendants for the purpose of seeking disgorgement of investor funds in their possession.
The US authority said that White advertised his purported "25-year Wall Street career." In reality, the forex trading has incurred losses of investor funds, and White actually spent only six years as a licensed securities professional in Houston before being barred by the New York Stock Exchange.
"White and his companies’ brandished phony credentials and a can't-miss trading strategy to lure investors into a web of deceit," said David Woodcock, director of the SEC's Fort Worth regional office. "In reality, White was suffering forex trading losses and putting investor money to other uses,” added Woodcock.
The SEC alleges that these claims were false. While White and KGW Capital tout a track record for the fund that began in January 2009, Revelation Forex did not actually receive investor funds or begin forex trading until September 2011. The fund has since incurred realized trading losses of more than $550,000 plus approximately $1,419,600 in unrealized losses through to 31 May 2013.
The court has granted the SEC's request for an asset freeze and temporary restraining order against White, KGW Capital, Revelation Forex, and RFF GP, which is the general partner of Revelation Forex. The court appointed Kelly Crawford as the receiver over these entities. A hearing has been scheduled for 18 July 2013, on the SEC's motion for a preliminary injunction.
The SEC's investigation was conducted by B David Fraser, Michael Umayam, Keith Hunter, and R Joann Harris of the Fort Worth Regional Office. The litigation will be led by Janie Frank and Fraser. The SEC said that it acknowledges the assistance of the CFTC, FBI, and Texas state securities board.