Chicago Trader and His Company to Pay $377,000 for Forex and Commodity Fraud

The Commodity Futures Trading Commission(CFTC) yesterday announced that the U.S. District Court for the Northern District of Illinois entered a consent order on March 21, 2022 for a permanent injunction, monetary sanctions, and equitable relief against defendants Dro Kholamian of Barrington, Illinois and his company, Blue Star Trading, LLC (Blue Star), which had an office in Park Ridge, Illinois.

The consent order resolves a CFTC action filed on November 30, 2018 alleging solicitation fraud, misappropriation of client funds, and failing to register with the CFTC as a commodity trading advisor and an associated person.  

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The order requires Kholamian and Blue Star to pay $227,000 in restitution to victims of their scheme and to pay a $150,000 civil monetary penalty. The order also permanently prohibits the defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged, and imposes permanent registration and trading bans.

Case Background

The order finds that from January 2013 through November 2018, the defendants fraudulently solicited and accepted $995,000 from clients for futures and/or forex trading through accounts that Kholamian and Blue Star managed. Kholamian sought out some clients through his connection with his Armenian church and social contacts of Armenian heritage. The defendants returned $768,000 to their clients and misappropriated $227,000 of their funds, using those funds to pay other clients in a manner akin to a Ponzi scheme and to pay for Kholamian's personal and business expenses.  

Parallel Criminal Action

In a separate action, the U.S. Attorney's Office for the Northern District of Illinois indicted Kholamian, on nine counts of wire fraud. The criminal charges included the same scheme to defraud forex and commodity clients as charged in the CFTC's case as well as a scheme involving other fraudulent loans Kholamian offered. Following a guilty plea to one count of wire fraud, on September 3, 2021, Kholamian was sentenced to 48 months in prison and ordered to pay $755,000 in restitution.