Trevor Cook and Patrick Kiley: Partners in Crime
It looks like Pat Kiley and Trevor Cook have finally pushed their luck too far. The SEC has charged them with raising about $190 million, lying to clients about segregated accounts (while putting money in accounts they own under the names of various shell companies), diverting more that $42 million of client funds to their own uses. The good news is that there really was some forex trading going on. The bad news is that they lost about $40 million doing it. That's ok, some people did get to withdraw money and profits. The only drawback was that those $50+ million came not from trading, but from other investors' money.
The latest updates are that the SEC seems to think that Trevor still has some of that money stashed and seems to be spending it after it was all supposed to be frozen. I guess when you are trying to divert $42 million or so, it's hard to keep track of where it all is. I also suppose it might be a little hard to stop spending other people's money once you develop a taste for it.
For those of you who hate my long-winded writing style, you've already seen the highlights, so can skip the rest. For those who want some lessons to help you avoid scams, please bear with me and read on.
UniversalBrokerageFX.com (UBFX) was one of Patrick “Pat” Kiley's managed forex firms. Money was allegedly kept with Crown Forex and returns were a safe and solid sounding 10-12% per year. When things started to go wrong with Crown, the FPA placed a warning on UBFX's review page. That's when Marc Trimble (Pat and Trevor's good buddy) jumped in and started claiming that nothing was wrong with either Crown or UBFX. He even said he'd be willing to buy out the accounts of anyone who as worried about Crown Forex for 90% of the account equity. That was obviously a not true, since money in a forex account can only be returned to the account owner and Crown was in the process of ending all withdrawals at that time.
As you probably heard, Crown Forex ended up getting liquidated. Eventually, UBFX put a note on the company website saying that client funds were not accessible and pretty much blaming Crown Forex. Marc Trimble, in true weasel fashion, first edited, then later deleted his posts at the FPA. At the time, I assumed he was just a good friend of Pat Kiley and was too much of a wimp to step forward and admit he was wrong. Still, something about his writing style continued to set off those alarm bells in the back of my mind. Read through this and watch for the warning flags.
Maybe I'm just too criminally minded myself, but some things that make other people happily turn over their life savings just scream “SCAM! SCAM!! SCAM!!!” to me. First, Trimble's opening salvo defending Crown included this dire warning:
First, it is extremely irresponsible to write about things of which you have no knowledge, especially on the internet. Comments like "I think it might be a scam" may fall under Federal Internet Harrassment laws when delivered in the context of a website that is meant to review services. I'd caution against expressing/intimating contempt before one investigates.
He also went on at length about how funds with Crown were safe because it was “heavily regulated” and how UBFX was legitimate. Both turned out to be total lies.
That's when I jumped in and pointed out that saying something about a company possibly being a scam is legally protected speech. Real people were having real problems getting their money out of the brokerage. The FPA's AsstModerator stepped in and said that the FPA was opening a formal investigation of Crown at that time.
Trimble gave a partial apology for his bogus legal rantings. He went silent until after I pointed out that the regulators seizing control of Crown Forex meant that it really was heavily regulated. He then responded:
If you had bothered to read the rest of my quote you would have been able to deduce that they are heavily regulated. Anyone with half a brain can Google the various regulatory agencies and deduce the same. But I digress...I suggest folks let the banking authorities do their jobs and await the results. In the meantime, there are any number of reasons why retail customers may not be able to withdrawal funds, most commonly are third party wires and/or mistakes on form submissions. Without the specifics surrounding each case, it is perhaps unfair to smear an otherwise A+ broker.
"Crown Forex S.A. has appealed to the Federal Administrative Court against this decision of the FINMA."
I told him that he should use the other half of his brain. The regulators were blocking ALL withdrawals, and the complaints were far above anything that could be expected from normal paperwork issues.
There as more to his response, but he did a partial edit job before deleting the threads. Luckily, I'd quoted him. He claimed that he knew of no problems with UBFX customers having withdrawal problems. He also said:
In the spirit of legitimizing many claims, as is difficult under the current forum standards, I'll make the following offer:
If you are truly concerned about your accounts liquidity at Crown, I'll offer to buy your account at a 10% discount or 90 cents on the dollar.
I pointed out that money in accounts can only be withdrawn by account owners and that the regulators were blocking all withdrawals. He conveniently ignored my suggestion of getting any account at Crown to pull out $100.
Marc then shifted back to a conciliatory tone and claimed the the problems at Crown were normal because of new banking procedures. They were normal, for forex firms that couldn't pass a simple audit as part of the new regulations. He said people should wait. I pointed out that was all people could do. He ignored my question about how a regulator takeover could be “normal”. Those Swiss auditors and regulators are still working their way through the Crown fiasco even today.
Marc's final post asked that the word scam shouldn't be thrown around so loosely. Personally, I think the FPA should have declared Crown to be a scam the moment the regulators took over. They continued to violate any number of rules, even after being forced into liquidation. I guess Marc Trimble didn't care. I wonder how much already knew about how much of the money placed with UBFX never even made it to Crown.
An essential skill of a conman is to be able to deal with dissent. In this case, Marc Trimble's first reaction was to make a bogus legal threat. Many people will immediately go silent rather than risk facing something like “Federal Internet Harassment Laws”. There are no laws with that title, but it's designed to sound frightening. When a conman realizes that fear won't work, he tries insulting people who argue with him, telling them that anyone with half a brain will realize that the con is legit. A conman will do anything to silence or discredit any dissent. A conman also ignores inconvenient questions and then tells people “wait, it will all be ok” once things start to go wrong. Marc Trimble's words would suit any conman quite well.
Maybe I'm wrong and Trimble is just a little slow to see the signs of a massive fraud. Then again, he was reportedly found living in a mansion that was seized as part of the whole SEC “grab the illegally acquired assets” maneuver. Trevor Cook and Pat Kiley also seemed to be living there.
But, let's move on to the most prominent of the main players. Pat Kiley ran several investment companies and had a Christian Radio Show. If you check the anti-fraud education materials, you'll find that quite a few frauds target “affiliate groups”. This works something like “You can trust me, because you and I belong to the same (religion, ethnic group, etc.). Affiliate fraudsters use your membership in a group against you. Pat wanted victims to trust him because he was a good guy, a God-fearing Christian who was there on the radio. Looks like Pat was a wolf in sheep's clothing.
Quick question for those of you who attend and stay awake in Church. What's the ONE time that Jesus showed what could be considered to be serious anger? John 2:15-16: And He made a scourge of cords, and drove them all out of the temple, with the sheep and the oxen; and He poured out the coins of the money changers and overturned their tables; and to those who were selling the doves He said, "Take these things away; stop making My Father's house a place of business."
So, I pretty much think the sermon for this is “Separation of Church and Finance”. The offense wasn't selling animals or changing money, it was using a holy place for the promotion of business. I'd think that using a Christian radio show for commercial purposes doesn't hold up very well under this scrutiny. Considering that the commercial purposes seem to be criminal in nature, there isn't too much doubt left about whether Patrick would be driven out and have his tables overturned.
So, the final lessons of this are to watch for any hint of fraud. In this case the % return was fairly reasonable, so it does pass the “Is it too good to be true?” test, so you need to look for other warning signs. Do your research. Don't trust someone because he's a member of a specific group. Don't stop asking questions because of threats of useless reassurances. If anything looks even slightly out of place and your questions aren't answered in a complete and professional manner, take your money elsewhere.
I'd like to thank the FPA Scam Investigations Committee for letting me write this article for them.
Receiver Information for SEC v. Cook et al.
FPA Scam Finding against UBFX.com, Pat Kiley, Trevor Cook, and associated companies
Crown Forex Discussion Thread where Marc Trimble attempted to delete what he wrote.
FPA Review Page for UniversalBrokerageFx.com
Press Release: SEC Obtains Asset Freeze in Minnesota-Based Foreign Currency Trading Scheme; 2009-253; Nov. 24, 2009
SEC: Trevor Cook facing possible contempt charges for violating court orders.
Marc Trimble was living in a mansion that was siezed.