Trader’s Assets Frozen in Fraud Inquiry
A federal judge has frozen the assets of a 28-year-old Sherman Oaks man accused of running a “boiler room” sales operation that fraudulently solicited nearly $4 million from 238 investors across the nation by promising them large profits on foreign-currency trading, federal regulators said Wednesday.
In a complaint filed in federal court in Illinois, the Commodity Futures Trading Commission accused Michael Zelener, also known as Mikhail Zelener and Michael Marshall, of fraud. The CFTC sought to fine Zelener and recover any ill-gotten gains from him and several companies he is associated with, including British Capital Group of Los Angeles and AlaronFX Inc., or AFX, a Chicago trading operation.
Zelener couldn’t be reached for comment.
The federal lawsuit alleges that beginning in April 2001 Zelener’s operation used high-pressure sales tactics and promises of high profits at limited risk to entice investors to engage in speculative trading of foreign currency futures contracts.
British Capital’s customers lost almost all of their investments within a few months of investing and only one earned a profit last year, coming out ahead by $19.21, said Rosemary Hollinger, regional counsel for the CFTC Division of Enforcement in Chicago.
“I’ve been here 16 years and it’s the worst statistic I’ve ever seen,” Hollinger said.
The 143 other British Capital customer accounts carried at AFX in 2002 lost more than $1.4 million, while British Capital earned more than $1.4 million in payments or fees from AFX, the commission said.
The complaint alleges that British Capital touted the trading program as a conservative high-yield, low-risk investment program staffed with professionals who would oversee customer accounts on a 24-hour basis.
Instead, the suit contends, Zelener operated British Capital as a boiler room sales operation that lured unsophisticated investors with phony promises of profit as high as 120% annually.
The CFTC said U.S. District Judge Matthew F. Kennelly issued a restraining order Tuesday freezing the assets of British Capital and Zelener, and prohibiting Zelener and the two firms from destroying documents.
