Two Orange County firms and three area employees have been snared in a three-state crackdown aimed at shutting down an alleged fraudulent investing scheme.
Nine individuals, including two from Orange County and one from Los Angeles, were arrested Thursday after their firm, Cleveland-based Options Trading Inc., was indicted by an Idaho grand jury for allegedly defrauding investors.
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, 41, of Irvine, and Jeffrey A. Moore, 32, of Costa Mesa, who was listed as president of Options Trading. Authorities said another Newport Beach firm, Ronald Allan Ltd., also participated in the illegal telemarketing operation.
Seven other employees, including Christian Weber of Los Angeles, were arrested at Options Trading offices in Austin, Texas, and Akron, Ohio, according to authorities.
Executives for the companies could not be reached for comment.
The participants set up a “boiler room” business that allegedly used telephone sales and fraudulent statements to entice investors to buy foreign-currency options, according to law enforcement officials.
Company representatives apparently inflated investment gains to potential customers in order to get them to open an account. When people tried to get out, the representatives allegedly reported huge losses to the customers’ investments and attempted to charge a “large” fee to close the account.
In Idaho, a state grand jury indictment charges that Options Trading and the individual defendants fraudulently solicited investments from Idaho residents and refused to return funds when requested to do so by investors. Idaho victims lost more than $600,000 invested with Options Trading, authorities said.
The indictment charges the defendants with money laundering and racketeering, predicated on the crimes of commodities fraud, grand theft and petty theft.
After arresting Cunningham and Moore in Newport Beach, authorities seized a 1998 Jaguar and two 1998 Ferraris, valued at about $400,000. Officials also confiscated several bank accounts worth several million dollars.
The individuals named in the indictment, in addition to Moore, Cunningham and Weber, are Ohio residents Jim Blyth, Harry Crawford Jr., Michael Gordon, Robert Jones and James R. Kelsall, as well as Dennis Hayburn, address unknown.
Separately, a Texas judge issued a temporary restraining order against Options Trading after state regulators filed suit alleging that the firm set up a “boiler room” in Austin.
“We found 30 people at 25 desks lined up side by side with 166 boxes of lead cards with the names of customers to call and sales pitches,” Texas Securities Commissioner Denise Crawford said.
Participating in the local investigation is the County of Orange Boiler Room Apprehension (COBRA) Task Force, a multi-agency effort that battles telemarketing fraud.
Bloomberg News contributed to this report.