Valdas Dapkus and Tradewale ordered to pay $2.8M for Retail FX fraud scheme

U.S. derivatives market regulator Commodity Futures Trading Commission (CFTC) has announced that the U.S. District Court for the District of New Jersey issued a default order of final judgment against Illinois-based Valdas Dapkus on November 28. On May 4, the court issued a default order of final judgement against two entities Dapkus controlled – Tradewale LLC and Tradewale Managed Fund.

The court’s orders resolve the CFTC’s September 2021 action against Dapkus and the Tradewale entities, finding all defendants liable for fraudulently soliciting members of the public for investments in a purported retail off-exchange foreign currency fund managed by Tradewale and misappropriating investor funds. The Tradewale entities were also found liable for failure to register as commodity trading advisors (CTA).

The orders require Dapkus and the Tradewale entities to pay, jointly and severally, $713,520 in restitution and a $2,140,560 penalty. The orders also impose permanent injunctions on Dapkus and the Tradewale entities, barring them from, among other things, trading on CFTC-regulated markets and from engaging in conduct in violation of the Commodity Exchange Act (CEA) as alleged in the complaint.

Case Background

The September 2021 complaint alleged, among other things, that in soliciting members of the public to trade, Tradewale made various material misrepresentations and omissions, including that it had a “unique trading system” using “artificial intelligence” to trade forex. Tradewale also claimed it generated average monthly returns of 4%-11% and average yearly returns of over 55% with “minimal risk.”

The complaint further alleged that, although Tradewale’s solicitation materials claimed accounts could be “easily accessed,” most, if not all, of Tradewale’s customers in the United States were never able to withdraw funds from their accounts. Instead, the defendants misappropriated customer funds for unauthorized purposes, including misappropriation of funds in bank accounts Dapkus established and was the sole signatory.

In its orders and related opinions, the court found the complaint sufficiently alleged Dapkus and the Tradewale entities intentionally made material misrepresentations and omissions to entice individuals to deposit and invest funds with Tradewale and then misappropriated those funds for their own benefit. The court further found the Tradewale entities received approximately $713,520 from approximately 17 customers and that none of those customers received any return of their principal investment.

The court also found that, according to the allegations in the complaint, the Tradewale entities acted as CTAs because they solicited funds for an investment vehicle by way of the mail or other means of interstate commerce and did so without being registered with the CFTC.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC said it will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.