Assets Found From Alleged Sales Scam

Securities regulators in Texas said Monday that they have recovered about $18 million for investors who allegedly were bilked in a nationwide scheme with ties to Orange County.

Most of the money from the alleged scheme involving foreign-currency options was found in Bermuda. It will be returned to more than 430 investors in Options Trading Inc. in the next few weeks, said David Grauer, head of enforcement for the Texas State Securities Board, which led the investigation.

The value of the firm’s assets was lifted by the surging Japanese yen during October, ensuring that customers will recover most of their investments.

“It’s very rare in these situations” to recover so much money for investors, Grauer said.

Cleveland-based Options Trading set up a “boiler room” in Austin that used telephone sales and fraudulent statements to entice investors to buy the currency options, according to a lawsuit filed in July by the Texas attorney general’s office. In all, the firm took in about $20 million from investors nationwide since January, authorities said.

In July, local authorities searched the Newport Beach offices of an Options affiliate, Currency Trading International Inc., a security brokerage house. They arrested the company’s vice president, Craig Cunningham, and Jeffrey A. Moore of Costa Mesa, president of Options Trading.

The local investigation was headed up by the County of Orange Boiler Room Apprehension, or COBRA, Task Force, a multiagency effort that battles telemarketing fraud. The status of refunds to California investors could not be determined Monday.

Moore referred questions to the firm’s attorney, Steve Williger.

“The civil case is resolved, the company is in receivership, [and] customers are receiving their money,” Williger said.

What’s more, because of the October rise in the yen, the firm generated higher returns for its clients than most options traders operating in the market, he said. Many clients who bought yen options saw their investments increase after the firm’s assets were seized.

According to an FBI affidavit filed in Cleveland, Options Trading employees made unauthorized trades in customers’ accounts, refused to refund investments on request and even threatened and coerced clients into buying currency options.

On July 30, law enforcement officials arrested eight Options Trading principals at the firm’s Austin office and at offices in Newport Beach and in Akron, Ohio. An Idaho grand jury on July 2 indicted the eight on charges of money laundering, racketeering, commodities fraud and theft.

In August, authorities seized the firm’s assets, including about $10 million in cash in Bermuda, houses, a 1998 Jaguar and two 1998 Ferraris in California. At the same time, a federal judge in Ohio appointed a receiver to oversee the firm’s operations.

Options Trading Group, Moore and Cunningham were named as defendants in the Idaho indictment, along with Christian J. Weber, Robert Shane Jones, Harry Crawford, Dennis Hayburn, Jim Blyth, Michael Gordon and James R. Kelsall.

Idaho Atty. Gen. Alan Lance dismissed the indictments last month, saying he expects federal authorities in Cleveland to file criminal charges against Options Trading and its principals. So far, no federal charges have been filed.

The day of the arrests, a Texas judge issued a restraining order prohibiting the firm from opening new positions in foreign-currency options for investors.

Defendants in the Texas lawsuit included Moore, 18 other agents of the firm and two California companies--Currency Trading International and Ronald Allan Ltd.--that state regulators say are affiliated with Options Trading. Ronald Allan Ltd. was also named a defendant in the Idaho indictment.