Texas Securities Commissioner Travis J. Iles took emergency action on April 3 to stop the offering of a purported foreign currency trader promising a “safe haven” investment in a time when world markets are roiled by the COVID-19 pandemic.
According to the Emergency Cease and Desist Order, Florida resident James F. “Stormy” Walsh is soliciting Texas residents for a foreign currency trading program that he claims will return up to 11% a month, “basically risk-free.”
In online solicitations, Walsh described the investment as a “safe haven” in the context of “all the turmoil the last few weeks about the virus and its massive effects on the world’s financial markets.”
Walsh, according to the order, said the trading program could provide a source of supplemental income at a time when investors “cannot go out of [their] house[s] and take care of [their] famil[ies].”
The order is the first action taken by a state securities regulator against a promoter using COVID-19 as a tactic to lure investors, and it comes a little more than a week after the Texas State Securities Board issued the Investor Alert, Protecting Your Financial Health in the Pandemic Era, warning of a proliferation of schemes tied to the pandemic.
The Investor Alert warned that scammers will be targeting retail investors with tactics and products that track the recent economic and social trends, promising lucrative returns to people concerned about their portfolios and retirement plans.
According to the order, Walsh claims that the investments in his trading program are “basically risk free.” He is telling potential investors that he is paying 60% of the profits from trading international currencies to investors and keeping 40% of profits for himself.
Walsh is violating the Texas Securities Act because neither the investments nor Walsh are registered in Texas, according to the order.
Walsh initially agreed to stop offering investments in the trading program until he became compliant with the Securities Act. But he continued to illegally and fraudulently offer the securities, according to the order, threatening immediate financial harm to Texas residents.
According to the order, Walsh recently told potential investors he was earning greater profits because of the volatility the threat of COVID-19 has engendered in the markets.
Walsh claimed that in a recent 10-day period he earned $46,000 in profit on an account worth $100,000, according to the order.
Walsh is not, however, telling investors of the numerous risks in trading the currencies of other countries. These include fluctuations in a country’s interest rates, the impact of stock, bond, and commodity markets on currency exchange rates, and the possibility that technical problems can stall trades.
Walsh has 31 days to file a notice to challenge the order before the State Office of Administrative Hearings.