U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23756 / February 21, 2017
Securities and Exchange Commission v. FX & Beyond Corporation et al., No. 1:17-cv-00187-GBL-IDD (E.D. Va. filed Feb. 16, 2017)
SEC Charges Virginia Man and Company with Forex-based Offering Fraud
The Securities and Exchange Commission today charged Steve H. Karroum (a/k/a Mustapha Karroum) and his company FX & Beyond Corporation with defrauding investors out of $1.7 million in a foreign exchange trading program.
The SEC's complaint was filed in federal court in Virginia, and alleges that, from 2007 to 2014, Karroum and his company falsely claimed that Karroum could conduct forex trading without loss. Karroum allegedly told investors their funds would be used for forex trading and would be kept "safe." According to the complaint, while Karroum used some funds for forex trading, after 2010, Karroum stopped sending investor money to his forex broker for trading even though he continued to solicit new investors. Instead, he allegedly used investor funds for undisclosed purposes, including making Ponzi-like payments to investors, paying unrelated business expenses, and misappropriating funds for his and his wife's personal use or benefit, such as for purchases at Victoria's Secret, the Disney Store, Gymboree, Papaya Clothing, McDonald's, and Joseph A. Bank, and to pay premiums on his life insurance policy. In addition, as alleged in the complaint, from late 2013 until November 2014, Karroum hid trading losses from his investors. In total, at least 14 investors lost approximately $1.7 million of their principal.
The SEC's complaint charges Karroum and FX & Beyond with violating Sections 17(a), 5(a), and 5(c) of the Securities Act, and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties. The complaint also names as a relief defendant Karroum's wife, Sahar Karroum (a/k/a Sahar Mohammad Jamil Al Bouhairy), for the purpose of recovering funds that were unlawfully used for her benefit.
During the SEC's investigation, the agency brought a subpoena enforcement action against Karroum and FX & Beyond, in the course of which it obtained a court order requiring Karroum to sign a written consent for the release of his e-mails from his internet service provider.
The SEC's investigation was conducted by Stephen Kaiser and Hemma Lomax, and supervised by Timothy England. The litigation will be led by Derek Bentsen. The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority (FINMA) and the United Kingdom Financial Conduct Authority (FCA).