A North Carolina man is expected to plead guilty this week to charges that he participated in a $35 million foreign currency trading Ponzi scheme. Court records indicated that a change of plea hearing is currently scheduled on October 12 for Bryan Keith Coats, of Clayton, North Carolina. Coats and several companies he operated were named in a January 2011 complaint filed by the Commodity Futures Trading Commission ("CFTC"), a foreign currency regulator. Criminal charges followed, and Coats faced charges of investment fraud and money laundering. Money laundering carries a maximum prison sentence of twenty years in federal prison, along with a fine of the greater of (1) $500,000 or (2) twice the value of property involved in the transaction.
According to the complaint filed by the CFTC, the scheme started in April 2007, when Coats, along with defendants Keith Simmons and Deanna Salazar, solicited customers to invest in various entities operating as Black Diamond Capital Solutions, LLC and Black Diamond Holdings. Potential customers were told that Black Diamond operated a sophisticated forex trading system, with three years of experience engaging in highly successful forex trading. Average monthly returns of up to four percent were promised, and investors were assured that trading stop mechanisms were in place and that no more of twenty percent of invested funds were at risk. In June 2008, Coats established his own hedge fund, Genesis Wealth Management, LLC, through which he solicited customers for Black Diamond. As a result, at least 240 individuals invested $35 million with Black Diamond. However, in March 2009, Black Diamond began to refuse principal redemptions and interest payments, providing investors with several false excuses. Following an investigation by the CFTC, a company principal admitted that Black Diamond "has never traded currency, held brokerage accounts, or advised anyone on currency trades," and utilized hypothetical trading results to calculate the gains customers were supposedly making.
One of the company executives, Keith Simmons, was arrested in December 2010 and charged with conspiracy to commit money laundering, wire fraud, and securities fraud. Another, Deanna Salazar, recently pled guilty to charges of investment fraud conspiracy and tax evasion.
A copy of the CFTC Complaint is here.