Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—E.D.N.Y.: Magistrate’s recommendation to enter default judgment against ForexnPower adopted; sanctions imposed, (Mar 17, 2026)

By Rebecca E. Hoffman, J.D.

The civil monetary penalty was tripled, in view of the egregiousness of the defendants’ targeting of Korean-speaking New Yorkers who put their trust in this purportedly safe investment.

A March 10 decision locked in a default judgment against two New York companies for retail forex fraud and fraud as commodity pool operators and commodity trading advisors, among other charges. The court granted the CFTC’s motion for default judgment, adopting a magistrate judge’s Report and Recommendation (CFTC v. Safety Capital Management, Inc., No. 15-CV-5551 (E.D.N.Y. March 10, 2026)).

The Commission brought this action against Safety Capital Management, Inc. and GNS Capital Inc., both doing business as ForexnPower, as well as the president of GNS and CEO of Safety Capital, for violations of the Commodity Exchange Act and related regulations. According to the magistrate’s report, Safety Capital acted as an unregistered commodity pool operator (CPO) when it solicited forex customers. “Instead of using customer pool funds for retail off-exchange forex trading, Safety Capital misappropriated this money for personal and business expenses,” the report said. Meanwhile, GNS acted as a CPO and commodity trading advisor (CTA), collaborating with Safety Capital in giving advice and using interstate commerce to facilitate retail forex transactions.

The report said that the defendants advertised in Korean newspapers, on Korean radio, and that funds contributed to the pool would generate ten percent profit each month. Their customers lost almost $400,000 in total. The defendants did not keep the funds in a separate account and thus commingled them.

The individual defendants earlier were adjudged liable and, in related criminal proceedings, guilty of fraud and other charges.

Violations. The defendants were found liable for retail forex fraud. They promised the ForexnPower customers profits and delivered losses. Customers were told their money would be invested, but it was instead misappropriated. The companies were also found liable for fraud by CPO or CTA, in that, according to the complaint, they fraudulently “‘represented to pool participants that they would use pool funds to trade retail off-exchange forex transactions’” on the customers’ behalf.

The defendants were not registered with the CFTC when they solicited or accepted orders, solicited investors for their commodity pool, and traded retail forex contracts with pooled customer funds, rendering them liable for solicitation and acceptance of retail forex orders from retail forex clients without being registered, in violation of 7 U.S.C. § 2(c)(2)(C)(iii)(I)(aa)–(cc). The court also found that the two companies violated 17 C.F.R. § 4.20(a)–(c) by placing the customers’ funds in the bank accounts used for other purposes, thereby commingling pool funds with non-pool property. Their failure to register as retail forex CPOs and CTAs while acting as such also led to their liability. Finally, GNS registered as a CPO and CTA in October 2013, which meant it was required to produce documents upon CFTC request, but it failed to comply with an April 2014 subpoena.

Relief. The Commission established that the defendants’ ongoing conduct showed that they were reasonably likely to continue these violations without a permanent injunction. The magistrate recommended that the companies be jointly and severally liable for restitution, along with the individual defendants, and a civil penalty amounting to triple the amount of their gain: $1.4 million as to Safety Capital and $186,102 as to GNS.

In adopting the recommendations, the court said its review “does not leave the court with a “‘definite and firm conviction that a mistake has been committed.’” U.S. v. Veeraswamy, 765 F. Supp. 3d 168, 180 (E.D.N.Y. 2025) (quoting U.S. v. Snow, 462 F.3d 55, 72 (2d Cir. 2006)). It agreed with the magistrate judge that “‘Defendants not only engaged in a systematic and deliberate scheme to defraud the public, but they deliberately exploited their access to a vulnerable community—Korean-language speakers in Queens who were totally reliant on [the Defaulting] Defendants to protect and manage their investments.’”

The case is No. 15-CV-5551.

Judge: Garaufis, N.

Attorneys: W. Derek Shakabpa for the CFTC.

Companies: Safety Capital Management, Inc. d/b/a ForexnPower; GNS Capital, Inc. d/b/a ForexnPower

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