And then a month came when there was no statement from the broker and JR didn't return our phone calls. It wasn't long before rumors from some of his larger investors began circulating about his ill health and things quickly started falling apart. Investors were beginning to panic and some of them were actually going to Arkansas to try and see him in person. We ourselves were sensing that something really bad was going down and the worried phone calls from our family members were making things a lot worse. And when this whole illusion of prosperity started crumbling, it fell hard and fast.
On a Tuesday, JR accepted the last $1 million dollar investment from my brother's friend even while he was being investigated by the police, FBI, IRS and fraud division of the SEC. He was still hoping for that one miracle trade that would save him. After all, he only needed to make a few pips with a million dollars of new infused capital. Move over Bernie Madoff. Meet JR from Arkansas, forex trader turned ponzi crook. He might even be Madoff's new roommate now in the same federal penitentiary. And in 2006 Coes FX received a permanent injunction from the CTFC/NFA and ceased doing business (click to see this on the NFA website).
After JR's forex ponzi scheme was revealed, it all collapsed very quickly. My family members lost a lot of money and there was huge tension between those of us that got out of the deal earlier and safely and those that lost it all. We came out OK because we had gone to break even. But the devastation was widespread and horrendous for the majority of investors who had let their money compound year after year and had continually added to what they thought they were making.
JR was arrested and brought to trial. Many investors were too ashamed and embarrassed to admit that they had been prey to this guy, so very few people showed up at his trial. But enough of them wrote letters to seal the case against him. It was all a sham. He had produced photoshopped statements that he mailed out each month and we fell for them. In hindsight we could clearly see the warning flags, but the illusion of getting all that money clearly blinded us and hundreds of others. (click here to see the injunction from the U.S. Securities and Exchange Commission halting the Ponzi scheme).
JR was given a 15 year federal prison sentence for wire fraud. He was also ordered to pay restitution of $43.4 million dollars to his investors in the U.S. and Central America. JR pleaded guilty.
As painful as this experience had been for us, we learned a lot of important lessons from it.
1. Always protect your profit.
2. Trust no one / Question everything.
3. Make sure your statements come directly from your broker.
4. Check your broker's standing on the NFA's BASIC search.
5. The lure of easy money can corrupt good people.
In forex it's so easy to get duped. This was our first taste, but unfortunately not our last. And at the same time, if our paths hadn't crossed with JR, we'd never have discovered forex, which we love.
Here are direct links to the other four parts of this series:
Confessions and Revelations of a Forex Trader – Part 1 of 5
Confessions and Revelations of a Forex Trader – Part 2 of 5
Confessions and Revelations of a Forex Trader – Part 3 of 5
Confessions and Revelations of a Forex Trader – Part 4 of 5