The Commodity Futures Trading Commission (CFTC) has filed a complaint against Dwight A. Foster and K.E.L. Enterprises, Inc.

The complaint, submitted at the Michigan Eastern District Court on June 28, 2023, alleges that from at least January 1, 2017 to the present the defendants engaged in a multimillion-dollar fraudulent scheme through which they solicited not less than $13.2 million from at least 45 members of the public to participate in a commodity pool operated by Foster and KEL for the purpose of trading in commodity interests, including Forex pairs on a leveraged, margined or financed basis with participants who are not eligible contract participants (ECPs) and Forex futures contracts.

Instead of trading pool participants’ funds as promised, the defendants misappropriated all of the pool participants’ funds by depositing them directly into Defendants’ corporate bank accounts, rather than depositing the funds directly into an account carried in the name of the Pool at a Futures Commission Merchant (FCM) and/or a retail foreign exchange dealer (RFED).

Defendants misappropriated, and continue to misappropriate, participants’ funds to pay Foster’s personal expenses, including, but not limited to: car payments, insurance, credit cards payments, and other daily living expenses. Additionally, Defendants used not less than $10.1 million of later-in-time participants’ funds to pay earlier- in-time participants purported “profits” and/or “redemptions” in the nature of a Ponzi scheme.

Defendants took steps to conceal their fraud by, among other things, sending pool participants false monthly account statements which purported to show that Defendants’ Pool consistently traded at a profit each month during the Relevant Period.

Foster, individually and as the agent of KEL, made, and continues to make, fraudulent omissions of material facts in solicitations to actual and prospective pool participants and in monthly account statements to actual participants, including but not limited to failing to disclose that: (1) Defendants never traded pool participant funds as promised; (2) Defendants did not open forex trading accounts in the name of the Pool with any lawfully operating commodity exchange, or with any registered FCM or RFED; (3) Defendants misappropriated, and are continuing to misappropriate, participants’ funds; (4) the monthly “statements” Defendants sent to participants showing purported monthly profits were false, created by Foster, and not reflective of actual trading; (5) KEL was unlawfully acting, and continues to unlawfully act, as an unregistered commodity pool operator (“CPO”); and (6) Foster was unlawfully acting, and continues to unlawfully act, as an unregistered associated person (AP) of a CPO.

Throughout the Relevant Period, KEL acted at all times, and continues to act, as a CPO without being registered with the Commission. Throughout the Relevant Period, Foster acted at all times, and continues to act, as an AP of a CPO without being registered with the Commission. At no time during the Relevant Period did KEL keep and maintain the records required to be kept and maintained by a CPO, in violation of Regulations 4.21-4.23, 17 C.F.R. §§ 4.21- 4.23 (2022).

The CFTC complaint alleges that the defendants have engaged, are engaging and/or are about to engage in acts and practices in violation of Sections 2(c)(2)(C)(iii)(I)(cc), 4k(2), 4m(1), and 4o(1)(A)-(B) of the Commodity Exchange Act, (“Act”), 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc), 6k(2), 6m(1), 6o(1)(A)-(B), and Commission Regulations (“Regulation”) 4.20(a)(1), (b), and (c), 4.21-4.23, and 5.3(a)(2)(i) and (ii), 17 C.F.R. §§ 4.20(a)(1), (b), (c), 4.21- 4.23, 5.3(a)(2)(i), (ii) (2022).

Foster was, and is, a controlling person of KEL and did not act in good faith or knowingly induced KEL’s violations of the Act and Regulations described herein during the Relevant Period. Therefore, Foster is said to be liable for KEL’s violations of the Act and Regulations, pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b).

The CFTC seeks civil monetary penalties and remedial ancillary relief, including, but not limited to, trading and registration bans, restitution, disgorgement, rescission, post-judgment interest, and such other and further relief as the Court deems necessary and appropriate.