The Securities and Exchange Commission has frozen the assets of Houston CPA and lawyer Daniel J. Petroski, along with a former finance professor at Texas A&M University, alleging that they bilked at least 60 investors out of more than $19.5 million in a foreign exchange trading scam.
Petroski and adjunct professor Robert D. Watson have been charged with using forged bank records to make it appear they were earning spectacular returns from their trading activities.
The two men claimed investors would earn profits through Alpha One, a foreign currency trading software program purportedly owned by PrivateFX Global One Ltd., a company they jointly control. They claimed they would employ the services of 36 Holdings Ltd., a so-called deal-clearing company owned and controlled by Watson.
The SEC alleges that Watson and Petroski misrepresented to investors that their companies had millions of dollars in bank accounts in the U.S. and Switzerland and that their foreign exchange trading business had achieved an annual return of more than 23 percent since its inception and had never had a losing month. The SEC also alleges that the defendants historical performance claims are not supported by valid financial records. The scam dates back to at least July 2006.
As we allege in our complaint, these defendants used modern technology to create professional-looking, bogus documents that supported their extraordinary claims, said Rose Romero, director of the SECs Fort Worth Regional Office.
U.S. District Judge Sim Lake entered a temporary restraining order, freezing the defendants assets, and appointed Thomas L. Taylor III of Houston as a receiver to marshal assets belonging to the defendants and their affiliated entities. The receiver has also established a Web site to provide information to investors
The SECs complaint alleges that in response to investigative subpoenas, Watson and Petroski produced phony records purporting to show that 36 Holdings held an account at Deutsche Bank, where it earned more than $2 million for Global One in 2009 by trading foreign currencies. In fact, 36 Holdings did not even have an account at Deutsche Bank, according to the SEC.
The SECs complaint also alleges that the defendants provided SEC staff with phony bank statements from a Swiss bank and falsely claimed that 36 Holdings had almost $70 million on deposit there, including $11 million of Global One funds.
The SEC has charged Watson and Petroski with violating the Securities Act of 1933 and the Securities Exchange Act of 1934, and noted that the investigation is continuing.
Texas A&M University said that Watson resigned April 30, citing family reasons.
