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Nine Year Sentence for Forex Fraud. Too harsh or not enough?

Discussion in 'Forex Articles' started by Pharaoh, May 5, 2008.

  1. Pharaoh

    Pharaoh Colonel

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    Nine Year Sentence for Forex Fraud. Too harsh or not enough?

    Joel Nathan Ward used to be a hotshot forex guru with millions of dollars of managed account money under his control. Now, he’s looking at 9 years of hard time in federal prison along with an order to repay $11 million to investors. Is he a sleazy scumbag who should be grateful for such a short sentence, or a good guy who is being denied a chance to make amends for one terrible mistake?

    Before I get started, let me interject a personal story. I HATE scammers. The thought of some thief running off with another person’s money or possessions fills me with rage. This probably dates back to my house being robbed just before my 9th birthday. It was bad enough that they ransacked all of my parents’ stuff, but they dug through my closet and managed to find the box with my coin collection, tucked away in the same place as my Monopoly, Battleship, and chess sets. The thieves that robbed my house were pros and got away with their crimes. I decided it wouldn’t be so easy the next time. I guess that’s why I now have a safe that weighs over 900 pounds, a large dog, and an alarm system.

    Normally, I would join the chorus calling for this guy to be hung from the battlements and left to rot, but then I dug a little deeper and the case became more interesting. I still think this guy was wrong, but think it’s worth exploring how and why he went from being a good buy to being a bad guy.

    According to Joel, he learned to trade at a California school called Learn:Forex. He claims that his trading became consistently profitable, and he then opened the Joel Nathan Forex Fund. Not too long after, he purchased Learn:Forex. He was well respected in the world forex community and both write his own articles and he was frequently cited by others as a source of good information on forex trading.

    According to Joel, the school was losing money when he bought it, and since he’d successfully “borrowed” money from his own fund before and managed to pay it back out of profits, it didn’t seem to be too big of a thing for him to “borrow” more to keep the school afloat while trying to make it more profitable. He supposedly was about to do an IPO on the school and launch a new, larger fund that would have let him easily repay the missing 10+ million dollars when the whole scheme fell apart. He claims all the money was lost and that he only lived in a modest home so hadn’t spent it on a lavish lifestyle. At one point, while overcome with guilt, he described himself as a “financial serial killer”, and expressed deep regrets that he’d become a scammer, but even now remains determined to find a way to repay the lost money.

    The Federal prosecutors tell a different story. They say his fund was a Ponzi scheme. The prosecutors say that the missing millions went to pay for Joel’s salary, travel, extensive marketing, as well as other expenses. One of the prosecution’s expert witnesses was a finance professor employed by the CFTC. That witness audited the books and says that Joel was only using $2 million of the $15 million in his fund for trading, and that his trading profits from trading that $2 million came to $1000. (Personal note – Wow, and I though I had a bad time trading!). Joel’s response to this is to say that the professor lacked experience with forex to be able to interpret the account statements. I find this a little hard to believe – I’m not a professor of finance (I don’t even do a very good job balancing my checkbook), but when I first began demo trading forex, it was quite easy to see what my total profits and losses came to. I also had no trouble interpreting any of the Daily Confirmation Statements sent to me by my broker once I went live.

    According to the prosecution, “As a trader, he was a failure. The only success Ward had was in convincing others that he was successful.” and “Joel Nathan Ward earned every minute of the nine-year sentence the court imposed.”

    Joel did plead guilty to five counts of wire fraud, two counts of mail fraud and two counts of money laundering last year and asked the court to sentence him to house arrest so that he could keep trading to repay the money that his investors lost. The court instead imposed a 9 year stretch in Club Fed along with a requirement to repay $11 million stolen from investors. Joel went so far as to say “I will keep trading. The court can't stop me from trading.” I’m not a legal expert, but I think it would be well within the power of a Federal judge to impose an injunction against Joel to keep him from trading even after he completes his time in the federal lockup. Prosecutors say that he is very unlikely to ever be able to pay off the debt, especially through trading.


    This is where I am torn. Part of me says that he got off way too light and should be forced to sell his internal organs to help repay the money he stole from investors. Another part of me wonders if he really did just make a terribly foolish mistake and should be allowed to trade (under strict supervision) so that his skills might be used to help recover the money that has been taken. Punishment is important, but should punishment be so harsh that it reduces the chances of repayment? Or, will he just find a way to go around any restrictions and scam again?

    The prosecutors say his whole company was a scam from day 1. He says it only went wrong when he had to borrow money to keep his other company afloat? Assuming he was a legitimate trader at one time, should this be taken into account when considering a sentence? Does it really matter if he scammed from the beginning as opposed to making a mistake and falling off the straight and narrow?

    If you want to read more about Joel and his problems, here are some good articles I found online:

    http://www.sacramentotoday.com/news/templates/community.asp?articleid=78&zoneid=1
    Bloomberg.com: Law
    Foreign-Exchange 'Guru' Gets Nine-Year Term - The Collar (usnews.com)
    The Modesto Bee | A Q&A with Joel Nathan Ward
    The Modesto Bee | Forex trader Ward traded only a fraction of $15M, prosecutors say
    Foreign-Currency Trader Faces Criminal Charges for $7 Million Fraud
     
  2. fxisfx

    fxisfx Recruit

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    payback

    He should serve some time and payback what he took.
     
  3. toomanyquestions

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    He must have had some talent

    I didn't read the add'l articles you posted, but it seems as if the prosecutor's version is maybe a little harsh... I mean, yeah, the guy ran off the rails... but:
    Wouldn't he have had to have some modicum of success to amass any funds? or, was he sooo good at snowing people he was able to convince others they would get rich if they let him trade for them? It is hard to say... but wouldn't he have had to show some sort of trading record or again, did he manufacture his results and use this as evidence...

    There is an outside chance that he was just a naive business person who was really good at trading but had no clue as to what is considered good practice... it is quiet possible a fellow would look at a pile of money he mangages and says, no big deal, i'll fix this company and replenish my fund in short order...

    Ever since those guys on North Carolina were falsely accused for raping that girl, now totally exonerated and the prosecutor has been stripped of his power... well, just makes you want to be thorough before judgment is passed...

    Again, maybe he would have honored his fuduciarary responsiblity to his investors - but in jail, we'll never know...

    cheers,

    Jake
     
  4. bygolly

    bygolly Recruit

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    Too Harsh

    I met Joel and the Learn:Forex group at a Forex Expo in 2005 or 2006. He seemed to be sincere and genuinely trying to help others succeed in trading the Forex. I did not invest in his product because it was too expensive for me at that time. However, I thought well of him and his company. I am saddened to hear of his misfortune. Personally, I think the sentence is too harsh. I don't see this man as an intentional scammer.
     
  5. hectopascal

    hectopascal Recruit

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    Hi there,

    I did not read all the links either, but I think it is well
    deserved. I hate all these scammers out there who
    can not have the courtesy to leave other people's money
    alone, and try to make an earnest living.

    Ofcourse having lost money in 2007 by two scams...one.. 1world capital,
    and another one who took in $67M in 2007 alone, divided over several
    continents does not help.This is including from people who gave them their retirement money, who now have to keep on workng after 65.

    You can say that some scammers are worse than others, but in the end
    it comes down to the same thing, and that is that they steal other people's money to make themselves rich IAW thieves.

    So let's make this guy an example, and hopefully many to follow!!!!
     
  6. Swede

    Swede Recruit

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    re: Forex Fraud

    I have been in the machinery business for many years.....I also developed the ability to trade Forex, and of course many of my dealers have been very inerested in this form of profit making. What I find interesting is the number of people in the industry who ask me to trade their funds, willing to turn over 5-10,000 dollars, without any security other than our business relationships.

    Tempting but no thanks. This is how a "fund" gets started, but what happens when drawdowns accumulate and your "friends" would like to know how things are going.....is that when the fudging starts? Is that the turning point or catalyst for solicitation for more and bigger "investments"? I can see how some could get caught in a web of decept but when millions are involved something else is in play.

    To anyone I would say this.."if the man is such a hot trader, he will not want nor need other peoples money."

    Scammers deserve what the courts dish out. FRAUD IS FRAUD IS FRAUD!

    I know how I felt after accounting "frauds" (sorry I mean mistakes) put forth to the public by Nortel, Enron,Worldcom, and others causing huge losses to investors like myself. Executives who shut their eyes, or participate in deceptive practices need to think twice...IMHO
     
  7. tucanred

    tucanred Recruit

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    Joel Nathan Ward

    I'm going to give my own background on this event. I trained with Joel at Learn Forex in Sacramento in 2002/2003. At that time, he and the owner of Learn Forex with other investors had just been bilked out of over a hundred thousand dollars from a FX broker in Seattle, Washington. It became what I thought as an impetous to establish a transperant managed FX investment fund that a group of us discussed while at Learn Forex. Joel had set up a professional trading room at his home and seemed sincerely dedicated to having integrity when he asked me to join him in his FX trading endeavors when he formed his LLC. The requirement was to have attended Learn Forex, and at the same time having been vetted by the instructors has being trustworthy - based on Christian ethics. When Joel asked me, I had been trading for FXCM and recently left (2003) because of the management trading and drawning down my assigned account; something that went against our agreement that stipulated that I was the sole trader on the account. I had been a student of Learn Forex since 2001 (and my FXCM manager was a graduate of Learn Forex - so go figure). There was always a discussion in the Learn Forex classes about finding FX brokers that had integrity/transperancy - and I was certainly one of those vetting Learn Forex and didn't find any corruption. There were plenty of war stories. At that time I compared most FX brokers to Oanda - a FX platform that my son introduced to me as he was studying economics at Oregon State University and was a staunch believer in having control over my investments instead of putting tens of thousands into a brokerage - even those recommended by Learn Forex. (Remember this was five years ago - almost the dark ages of online retail FX trading compared to today.) Consequently, I started my own due diligence and in the process discovered that there is not much integrity/transperancy in the retail FX business - and felt I was in the wilderness with this belief. Over the years, I've stayed to myself; trading and working on a fairly reliable system that I use today to trade a FX managed account. Last fall I read about Joel's arrest. I can't say one way or the other about his outcome, Learn Forex or what happened to those who were involved in the novice phase of my FX trading career. I feel that there are too many "insider" market makers that corrupt the retail FX platforms that goes undedicted by inexperienced FX retail traders and/or is buried deep in the platform's network. I also find FX traders blaming brokerage platforms for their own mistakes. As well, over the past five years, you can learn how to trade the Forex Spot Market without paying a dime for classes. I always tell people not to pay thousands for classes. There is such a plethoria of online webinars/resources that it makes my own head spin when I learn that someone put down thousands to learn what they could have culled online for free. In this regard, people who put money into a Forex managed investment account have to do their own due diligence. The bottom line is caveat emptor; FX is not a sound investment strategy for the common masses. It's mass marketed to capture wanna be "traders" or those misguided souls thinking that FX is a sound investment strategy. Joel's FX investment management case is certainly something that got out of hand - but I had fortunately distanced myself with suspecting him of malfeance. Neither am I in defense of Joel nor condeming; as I know most people exaggerate the truth when it comes to telling people about their own trading profitability... simply to disguise or induce trusting people to invest in their trading fund simply to cover loses from previous clients, e.g. Joel. Perhaps Joel got caught in the same self-induced deceptive "merry-go-round" lie - that permeates throughout the capitalist milieu as the standard norm... and it finally caught up with him. I think it's just another example of how greedy people become when it comes to money i.e. Wall Street hedge fund managers selling subprime mortgages (sanctioned by the government by lifting the anti-predatory lending law of 1895 in 2003) to international banks ; plunging the global economy into a tailspin. Let me see, Joel goes to jail - financial institution CEO's and pirate hedge fund managers get multimillion dollar profits off of people's hard earn debt driven impoverishment. It seems to me the Feds ought to be less discriminating with enforcing the law. ;)
     
  8. MidasFX

    MidasFX Private

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    Most people probably don't realise just how easy it is to raise funds for trading. There are many people out there who are very willing to quickly part with their hard earned cash for the chanceto pick up high returns. Very few go through the process of checking the credentials and actual results of the trader they entrust their money with. Perhaps they were recommended to them by a friend and are happy to take their word for it.

    In a large part the investors must take responsabilty for their actions... they can't mortgage their Grandmothers home and then blame the trader for ruining her life because all her money was lost on a high risk endevour.

    But the story may go deeper than this. It is quite possible that the gentleman concerned initially was a very good trader and did indeed have the results to show he was highly competent.

    What happens though is that someone who is ethical and brilliant at trading say $1M can easily fall to pieces if they were to suddenly trade $30M (get too big too fast). Its like people who win tattslotto. Winning $1M does not make them a millionaire. If they have never earnt or handled a million dollars before then statistics show they will almost certainly lose it all and revert back to the income level they do have experience with.

    When you are awash with cash it is very easy for your judgement to become clouded and to genuienly think that you'll just temporarily take some money from here and use it to prop up another business over here... all the time believing that everything will work out ok because the trading will turn around any day now. People (courts) who have never been in this position often have no idea how this could possibly happen and automatically believe that the actions must have been malicious. This of course doesn't make the traders decisions right or ethical and punishment certainly needs to be dealt out to remind the person never to make that mistake again... but I've seen rapists and armed bank robbers get far less than 9 years. The courts need to be very sure they have a scam artist and not just someone who messed up.
     
  9. RWBarber4

    RWBarber4 Recruit

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    There is no difference

    It makes NO difference if at one time Ward was an above-board, competent trader/manager. A scam is a scam is a scam and fraud is fraud is fraud. Bad decisions are just that bad, and when they violate fiduciary responsibility it's a crime. Let this serve as a warning. My compliments to the prosecutors who got this decision and sentence.
     
  10. dances with Forex

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    "According to Joel, the school was losing money when he bought it, and since he’d successfully “borrowed” money from his own fund before..."

    That's all I need to know. There is no point in reading further. He stole investors' money the FIRST time he "borrowed from the fund"!!

    Now somebody wants to let him "honor his fiduciary responsibility to his investors"? He has already violated that TWICE. You can't honor your fiduciary responsibilities by paying people back after you violate your fiduciary responsibilities. That's called "restitution"; not "honoring fiduciary responsibilities." Who do you propose should give Joel money to trade in order to pay people back? The State?!!

    He's going to have to write a book or get movie royalties if he wants to pay his investors back. Now ask yourself: If he made millions on a book and movie deal, do you think he'd pay back his investors with it? I submit that he would just want to pay them back by trading ...and he couldn't generate profits to pay them back by trading before. No. My assessment: He's an addict.
     

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