“Alpha One” Foreign Currency Trader Lands 20-Year Prison Term
|U.S. Attorney’s Office February 10, 2012|
HOUSTON—Robert David Watson, 50, of Spring, Texas, has been sentenced to the statutory maximum of 240 months in federal prison for securities fraud, United States Attorney Kenneth Magidson announced today along with Lucy Cruz, special agent in charge of Internal Revenue Service-Criminal Investigations (IRS-CI). At a hearing just a short time ago, U.S. District Judge Gray H. Miller sentenced Watson to the statutory maximum term and ordered him to pay more than $22 million in restitution to his victims. During the hearing, several victims spoke about the impact the case had on them.
“Individuals who promote fraudulent schemes will be held accountable,” said Cruz. “These individuals face severe consequences including imprisonment and fines. Illegal activity involving the investment industry has brought financial ruin to many Americans. IRS-CI is proud to share our financial investigative expertise on this joint investigation to put a stop to this and other types of white collar crimes.”
Watson pleaded guilty to one count of securities fraud on June 10, 2011, stemming from his scheme to defraud investors in a sequence of trading enterprises he formed. According to the record of the case, between 2003 and 2009, Watson raised tens of millions of dollars from scores of 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, he represented that he sought profits in the foreign currency markets using a model called Alpha One, which he claimed he developed and owned. Among other things, Watson claimed Alpha One earned high historical returns since 2000, never had a losing month and earned an annualized return of 23.04 percent between June 2006 and February 2009.
Watson, however, admitted he failed to trade as he represented. Rather, he made a minimal number of trades and earned little, if any, profits. Nevertheless, he 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, that purportedly tracked returns from trading profits when in fact the statements did not reflect real trades or account values. To make those sham account statements appear legitimate, he prepared phony statements of trading activity and bank accounts, which he provided to the entities’ insiders and employees and showed to inquisitive investors. When investors withdrew supposed returns or their principal investments, he admitted he caused them to be paid with funds raised from other investors, not profits from foreign currency trades. Although he did minimal trading, Watson paid himself lucratively, receiving hundreds of thousands of dollars annually during the scheme.
In April 2009, Securities and Exchange Commission (SEC) Enforcement Division staff in Fort Worth, Texas, began to investigate Watson and the purported profitability of his enterprises. Watson, however, impeded that investigation by fabricating bank statements and foreign currency trading records and producing them to the SEC in a final attempt to conceal his fraud.
Special agents from the FBI and IRS-CI as well as staff from the SEC in Fort Worth and the Commodity Futures Trading Commission conducted the investigation leading to the charges.
Watson, previously released on bond, was immediately remanded to custody following the hearing today where he will remain pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future.
This case, prosecuted by Assistant U.S. Attorney Stephen L. Corso, was prosecuted as a result of Barack Obama’s Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.