Fraud Around Town

Hundreds of people were defrauded out of $8 million by a man identified as living in Arlington and two others from Waxahachie, according to accusations by the U.S. Commodity Futures Trading Commission.

One of the men, who was reached for comment, said he did nothing wrong and was shocked to see his name in court documents.

On Wednesday, the commission obtained an emergency court order freezing assets held by M25 Investments, M37 Investments, Scott P. Kear Sr. and Jeffrey L. Lyon, all of Waxahachie; and David G. Seaman, who is listed as living in Arlington but said he lives elsewhere.

The defendants are accused of running a foreign currency trading scheme out of branch offices in Watauga,West Virginia and Mississippi.

Many of the companies’ 224 customers are elderly and knew one another through churches, according to the commission’s complaint.

As of March, the companies had $3.9 million in assets, not enough to make promised interest payments and return the $8 million in principal investments, according to the commission.

Despite the shortfall, the men are accused of soliciting another $140,000 in May from more than a dozen additional customers.

Seaman, who declined to say where he lives, is the chief operating officer.

Seaman said he has been wrongly accused and has done nothing improper.

He said that as of Wednesday morning, when he called his bank, his assets had not been frozen.

"I’m sure you know with all the [Bernard] Madoff stuff that happened, the regulators are on a witch hunt right now," he said, adding that Lyon and Kear will also contest the allegations.

"I’m not an owner. My title was really . . . kind of a jack-of-all-trades type of guy. I ran customer service and stuff from day to day," he said.

The purported scheme promised monthly returns of 2 percent and annual returns of 24 percent yet engaged in "speculative and risky trading," according to court documents.

The men are accused in court documents of issuing monthly account statements that showed 2 percent interest credits when they actually consistently lost customer funds in trading or didn’t use the money for trades at all. Company promotional material showed the growth of an initial investment of $100,000 to more than $11 million after 11 years, according to the complaint.

Though the commission filed a complaint against the companies Tuesday,the National Futures Association, a self-regulatory organization for the U.S. futures industry, brought a disciplinary action against the companies after an audit in April.

Sharon Pendleton, the association’s director of compliance, said the two companies had issued promissory note agreements to customers but were "unable to provide us with proof they had liquid assets to cover those notes."

"The total was $7.6 million for the two companies," Pendleton said. "They had combined assets . . . [of] about $3.9 million. So there was a shortfall."

In a report on its Web site, the association accused the companies of "operating a Ponzi scheme whereby they have obtained hundreds of loans from unsophisticated persons who are solicited, among other ways, at or through churches."

Lyon and Kear were named in the association’s report. Seaman was not.

The U.S. attorney’s office for the Northern District of Texas is providing local counsel for the case, a spokeswoman said.