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Christopher B. Cornett — Forex Fraudster

Unlike other financial markets, the Forex market has very little legal and capital restrictions. Thus, it is a blessing for a beginner who lacks financial strength. However, con artists misuse the FX market for their personal gains. Thus, it is a must to scrutinize the schemes related to the foreign exchange trading. Only then an investor can avoid emotional and material pitfalls and stay away from the fraudsters. A little bit of online due diligence can sometimes reveal staggering details about a person offering an attractive Forex investment scheme. Unfortunately, very few investors spend time to perform a background check. The Ponzi scheme offered by the Texas resident Christopher Brown Cornett is a perfect example of an investment fraud, which could have been avoided by investors had they performed a little due diligence online.

Cornett’s background

Between August 1998 and March 2001, Cornett, then a FINRA-registered representative, was employed at Dean Witter Reynolds Inc., a full-service brokerage firm (later merged with Morgan Stanley). He was discharged of his duties for non-compliance to the company rules. Thereafter, from April 2001 to March 2002, Cornett worked for Brookstreet Securities. During his tenure, a notice (NTM – Notice to Members) was served by the NASD (“National Association of Securities Dealers”) alleging (NASD Case #C06020023) that he forged a customer’s signature on a check and cashed $28,000.

The NASD also barred Cornett from having any kind of association with its members and ordered to pay a restitution of $28,000 to the customer. Cornett, without denying the allegation that he stole funds without the knowledge of the customer, consented to the sanctions. As a consequence, Cornett was dismissed from the Brookstreet Securities. Furthermore, on April 30, 2003, the US District Court of Texas sentenced Cornett to 37 months imprisonment on five counts of bank fraud. Since March 2001, Cornett was not registered with the CFTC in any capacity.

Forex trading journey

Following his release from the prison, Cornett ventured into Forex trading. Beginning in August 2006 and continuing until May 2007, Cornett introduced himself as a highly successful trader to prospective customers and offered to manage their FX trading account on a precondition that a power of attorney (POA) should be given to him after opening an account at Global Forex Trading (GFT).

Through his marketing efforts, Cornett received POA’s to trade in five accounts (three individual and two joint). Altogether, between August 2006 and January, 2008, a sum of $62,000 was deposited in the respective trading accounts by the individuals who provided the POA. Cornett, who had little knowledge about currency trading, lost $60,600. The clients withdrew the remaining amount. As if this was not enough, in October 2007, Cornett opened a trading account in his own name at GFT and deposited $13,500. In a short span of three months, Cornett’s losses mounted to about $13,000 in currency trading.

Establishing companies

The first-time experience of playing with public money, through POA, provided the necessary impetus to Cornett for taking his Forex trading misadventure to the next level.

In June 2008, Cornett once again started soliciting individuals for a pooled investment in foreign exchange. However, this time around, he established several companies to achieve the objective.

On May 15, 2007, Cornett organized his first partnership company named ITLDU. The partnership deed indicated that the company, which was not registered with the CFTC in any capacity, had its principal office in Austin, Texas. Furthermore, the agreement showed that Cornett and another individual named Kevin Nix were the general partners of the company.

In January 2008, Cornett formed another partnership company with Nix. The company was christened as ICM. Again, the partnership agreement showed that Cornett and Nix were general partners in the company and had its principal office in Texas. The partnership agreement also indicated that the company was formed to invest in the Forex market. Similar to ITLDU, ICM was not registered with the CFTC in any manner.

On October 15, 2009, Cornett formed another limited liability company in Texas. Cornett named the company as International Forex. Filings with the Texas Secretary of State showed Cornett as the manager, registered agent and organizer of the company. On April 16, 2010, an amendment filed with the Texas Secretary of State substituted Lori McClure and Michael Pavlovsky for the registered agent and manager respectively.

On January 8, 2010, another limited liability company named IFM was formed with Nix as the registered agent and organizer of the company. Moreover, Nix and McClure were listed as the managers of the company. However, in reality, Cornett was the de facto manager for both International Forex and IFM. Not surprisingly, both companies were not registered with the CFTC in any capacity.

As per the US laws, a CPO (Commodity pool operator) registration is required to commence pooled FX trading operations. However, Cornett never bothered to register himself as a CPO.

Luring investors into the scheme

Cornett started his full-fledged marketing activity in September 2009 and continued until October 2011. He was assisted by a Nevada-based limited liability company (formed in August, 2009) named Global Wealth Management Group LLC. The company was owned by Heidi Beryl Beyer of Scottsdale, Arizona.

Cornett claimed to prospective investors that he had never experienced a losing year or a losing month in Forex trading. Furthermore, to convince prospective pool participants, Cornett also provided them with a username and password to view the trading statement of a prevailing pool participant. In reality, the profit and balance statement were fabricated by Cornett to dupe investors.

To spread good opinion about his currency trading scheme, Cornett also signed legal agreements with pool participants. The agreements indicated that Cornett was the manager of the pool. The pool was referred by various names such as ITLDU, ICM, International Forex Management LLC, and IFM LLC. The agreements stated that the primary intention of the Forex pool was to trade in the foreign exchange market and to engage in any other related business activity. Furthermore, the agreements indicated that the profits generated from the FX trading will be split in a ratio of 75%/25% between the pool participant and the pool operator (Cornett).

The pool participants were also provided with a username and password to view their account statements online. On a weekly basis, Cornett updated the trading statements of each pool participant such that it showed only positive gains from the Forex trading. The account balances also reflected new deposits or withdrawals, if any, made by a pool participant.

To lure prospective investors for the trading scheme, Beyer also made claims similar to Cornett, regarding the latter’s trading history. Furthermore, employing the same tactics as Cornett, Beyer also provided prospective pool participants with a username and password to view the "real" account (containing fake profits) of an existing pool participant. Beyer mainly targeted retirement funds for the Forex pool. Investors sent the funds to Global Wealth either directly or through a third-party trust. Upon receipt, Global Wealth transferred the amount to the Cornett’s pool.

From the above-mentioned activities, between June 2008 and September 2010, personally and through Beyer, Cornett raised approximately $7.07 million (first batch) for his pool. Beginning in October 2010 and continuing until October 2011, an additional $6.95 million (second batch) was raised by Cornett, personally and through Beyer, from the pool participants.

Cornett’s trading stint

From the first batch of $7.07 million of pool funds, Cornett transferred $4.17 million to the trading accounts at Forex Capital Markets (FXCM) and Forex Capital Markets Ltd., U.K. (FXCM UK). At FXCM, the accounts were held in the names of ITLDU and ICM. On the other hand, the trading account at FXCM UK was held in the name of ICM. Apart from this, Cornett also traded in the currency market using the trading accounts in the name of McClure at both FXCM and FXCM UK. By the end of September 2010, Cornett had lost all the money deposited in the Forex trading accounts at FXCM and FXCM UK. At the same time, Cornett had only one profitable month and so earned a little money as management (pool operator) fees. However, he never disclosed his trading losses to the clients. In fact, from June 2008 to September 2010, Cornett continued to update the online weekly statements with unreal profits.

Out of the second batch of $6.95 million received from the investors, Cornett transferred only $3.37 million to several Forex trading accounts at FXCM UK, Deutsche Bank AG (DBFX), Dukascopy Bank SA (Dukascopy), Smart Trade FX, Forex Place Ltd (4XP), and FinFX Trading Oy (FinFX). Again, lack of knowledge and experience reflected in the Cornett’s trading activity. In no time, millions of dollars evaporated from the trading accounts.

Cornett lost about $1.26 million at DBFX and $250,000 at Dukascopy. Furthermore, he also sustained a trading loss of $299,000 at FXCM (UK). The trading experience of Cornett was in no way better at Smart Trade. After beginning to trade with a capital of $118,000, Cornett was left with only $74 in his trading account at Smart Trade.

Similarly, Cornett transferred $484,000 of investors’ funds to his trading account at 4XP. He withdrew $111,000 at a later stage. As of August 2011, Cornett had a zero balance, indicating a trading loss of $373,000, in his trading account.

According to the agreement with the investors, lack of success prohibited Cornett to earn any fees for managing the pool. As of October 2011, only about $520,000 of the investors’ funds remained in the bank account in the names of ITLDU, 1CM, International Forex, IFM, and Cornett. The rest of the pool funds were either lost in Forex trading or spent lavishly. However, during this period (from October 2010 to October 2011), Cornett continued to mislead investors with false weekly account statements.


During investigation, the CFTC was unable to secure the account statement of Cornett at FinFX. However, a due diligence performed on the bank accounts of Cornett revealed the money trail. According to the bank records, Cornett had initially transferred a sum of $955,000 to the FinFX trading account and withdrawn $50,000 later. Based on the trading history of Cornett, CFTC came to the conclusion that Cornett would have lost most, if not all, of the capital in his Forex trading account at FinFX. The same argument was put forth in the court of law.

Misappropriation of funds

Cornett used $1.64 million of the first batch of pool funds to pay purported profits or return principal to investors. Again, from the second batch of pool funds, Cornett used $2.22 million to pay purported profits or return principal to the customers. The rest of the money, i.e., approximately $1.26 million from the first batch and approximately $1.0 million from the second batch of pool funds, was misappropriated by Cornett. Investigations revealed that Cornett had used $600,000 of investors’ funds to cover his gambling losses at Las Vegas. Cornett also spent the pool funds for the purchase of costly cars including a Chevrolet Corvette.

Cornett’s arrest and indictment

Based on a complaint received from an investor on February 2, 2012, the CFTC filed a case charging Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register with the CFTC as a commodity pool operator. On February 15, 2013, the judge sentenced Cornett and Beyer to forty years and six years imprisonment respectively. Furthermore, the court ordered Cornett and Beyer to jointly pay $9.5 million as restitution. The court also ordered Cornett to individually pay an additional restitution of $0.8 million.

The story discussed here is a bit different from the others in the sense that the life of the investors would have been far better if they had spent a few minutes to perform online due diligence on Cornett. The experience of the investors once again underlines the importance of making rational decisions with a calm state of mind.

If you have any comments on this Forex scam or Christopher B. Cornett and his colleagues and their current activity, you can discuss it on our forum.