Nov. 16, 2010
PURPORTED FOREIGN CURRENCY TRADER CHARGED WITH FRAUD
(HOUSTON) - Robert David Watson, under indictment in the Southern District of Texas for allegedly obstructing the Securities and Exchange Commission’s (SEC) investigation into his purported trading, has been indicted a second time, United States Attorney José Angel Moreno announced today.
A Houston grand jury returned a seven-count indictment today charging Watson, 49, of Spring, Texas, with securities fraud, mail fraud, wire fraud and money laundering arising from an alleged scheme to defraud investors. A summons is expected to issue directing Watson to appear for arraignment on the new charges in the near future.
The indictment alleges Watson raised approximately $42 million from more than 130 investors and exercised custody and control over those funds under the pretense that he used them to trade, including buying and selling foreign currencies. To persuade people to invest or remain invested in his enterprises, the indictment alleges Watson represented that he sought profits in the foreign currency markets using a model called Alpha One, which he maintained he developed and owned. Among other things, it is alleged he claimed that Alpha One earned high historical returns since 2000, never had a losing month, and earned an annualized return of 23.04% between June 2006 and February 2009. According to the indictment, however, Watson failed to trade as he represented, executing a minimal number of trades and earning little if any profits.
Nevertheless, the indictment alleges, Watson caused periodic, sham account statements to be sent to investors via U.S. Mail or wire communication, or to be made available to investors electronically. Those statements purportedly tracked returns from trading profits, when in fact they did not reflect real trades or account values. To make the sham account statements appear legitimate, according to the indictment, Watson prepared phony statements of trading activity and financial accounts, which he routinely provided to the entities’ insiders and employees, and occasionally showed to inquisitive investors.
The indictment alleges that when investors withdrew supposed returns or their principal investments, Watson caused them to be paid with funds raised from investors, not profits from foreign currency trades. Although he did minimal trading, according to the indictment, Watson paid himself approximately $500,000 or more annually during periods of the scheme and purchased a $33,000 diamond ring using proceeds from the fraud.
Watson faces a maximum penalty of 20 years in prison and a fine up to $5 million if convicted of the securities fraud count. The mail and wire fraud counts carry a maximum penalty of 20 years in prison and up to a $250,000 fine upon conviction. A conviction for money laundering exposes Watson to a maximum 10-year prison term and up to a $250,000 fine.
Special agents from the FBI and the Internal Revenue Service - Criminal Investigations as well as staff from the SEC in Fort Worth and the Commodity Futures Trading Commission conducted the investigation leading to the charges. Assistant U.S. Attorney Stephen L. Corso is prosecuting the case.
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