CFTC Charges Denari Capital, LLC and its Owners with $8.3 Million Forex Fraud

CFTC - Denari CapitalWashington, DC – The U.S. Commodity Futures Trading Commission today announced the filing of a complaint in the U.S. District Court for the Northern District of California, charging defendants Travis Capson of Utah, Arnab Sarkar of California, and their California-based company, Denari Capital, LLC, with fraudulently soliciting more than $8.3 million from at least 28 participants. The participants’ funds were commingled in a pooled investment scheme that included leveraged or margined off-exchange foreign currency (forex). The complaint also charges defendants with registration violations and charges Capson with making false statements to the National Futures Association (NFA), the industrywide, self-regulatory organization for the U.S. derivatives industry.

According to the complaint, since at least 2012 and continuing to the present, the defendants pooled and commingled participant funds into one or more Denari bank accounts and used the funds for various purposes, including forex trading, real estate investments, securities transactions, and personal expenses. Capson and Sarkar fraudulently solicited participants and prospective participants by willfully or recklessly making material misrepresentations concerning the past profitability of Denari’s forex trading and the profits its participants were making. The defendants also allegedly issued false account statements to participants that misrepresented the profitability of their respective interests in the pool. According to the complaint, the defendants were required to register with the CFTC, but Denari and Capson did not register until May 1, 2019, and Sarkar never registered. By the end of July 2019, Denari allegedly owed its participants more than $5.2 million, which it does not have sufficient funds or assets to satisfy.

In a further effort to conceal the fraud, Capson allegedly made willfully false representations to, and concealed information from, the NFA during an examination conducted on July 15, 2019. In connection with the examination, Capson misrepresented to the NFA that Denari traded only proprietary funds and concealed its trading of customer funds, according to the complaint.

In its continuing litigation against the defendants, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act, and CFTC regulations, as charged.

Related NFA Actions

On August 6, 2019, the NFA filed a Member Responsibility Action against Denari and an Associate Responsibility Action against Capson based on the same conduct as alleged in the CFTC’s complaint. These actions summarily suspended Denari and Capson from NFA membership and prohibit them from soliciting and accepting any funds for investment in Denari, among other things.

The CFTC thanks the NFA for their assistance in this matter.

The Division of Enforcement staff members responsible for this action are Carlin Metzger, Joy McCormack, Matt Edelstein, Susan Gradman, and Scott Williamson.

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CFTC’s Forex Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which alerts customers to forex fraud and lists simple ways to spot forex scams.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.