A North Carolina man faces federal charges after being accused of operating a foreign currency trading operation that authorities allege was a Ponzi scheme. Sean F. Mescall, of Charlotte, was charged with a single count of wire fraud, which carries a maximum prison sentence of twenty years, along with criminal monetary penalties. Mescall is already behind bars in a federal prison in Elkton, Ohio, where he is serving a 27-month sentence for criminal contempt handed down after he sought to hide and transfer assets from his scheme against a judge's orders during a pending Commodity Futures Trading Commission ("CFTC") investigation. The CFTC instituted civil charges against Mescall in September 2009.
According to authorities, Mescall began the scheme in or around September 2006 when he advertised to potential investors that he was an experienced forex trader and could guarantee returns of 60% to 80% per year. Mescall told investors that his firm, Capitalstreet Financial, LLC ("Capitalstreet"), had been in operation since 1999 and had offices in North Carolina and New York. Investors were provided with monthly account statements that showed their accounts experiencing healthy returns. In total, nearly 70 investors entrusted $1.3 million to Mescall and Capitalstreet. In fact, Capitalstreet was akin to a one-room "boiler operation," according to court documents. In reality, only a fraction of the $1.3 million was actually used to trade forex, and nearly all of that amount was lost. Approximately $875,000 was used to make Ponzi-style payments to existing investors to create the appearance of a successful operation. Additionally, Mescall used investor funds to support a lavish lifestyle that included the purchase of $20,000 of jewelry and over $100,000 in rare coin and bullion.
A receiver was appointed to liquidate Capitalstreet and marshal funds for distribution to victims. From the Receiver's website, it appears that a distribution order was made on December 30, 2010 that made a total distribution of approximately $265,000 to investors holding total allowed claims of $1.189 million. This distribution amounted to a pro rata recovery of 22.3% of each allowable claim.
A copy of the CFTC Complaint is here.