June 10, 11

NEWS / Alpha One Foreign Currency Trader Convicted of Securities Fraud

HOUSTON, TX—Robert David Watson, 50, of Spring, Texas, the “developer and owner” of “Alpha One”, a purportedly profitable foreign currency investment model, has been convicted of securities fraud after defrauding investors of millions of dollars, United States Attorney José Angel Moreno announced today.

Indicted in November 2010, Watson pleaded guilty this morning to securities fraud before U.S. District Judge Gray H. Miller. Watson faces up to 20 years in prison and $5 million fine at sentencing which Judge Miller has set for Sept. 23, 2011. The court has permitted Watson to remain on bond pending his sentencing hearing. The United States will seek restitution for the victims of Watson’s fraud at the sentencing.

At today’s hearing, Watson admitted that between 2003 and 2009, he used and employed manipulative and deceptive devices and contrivances in connection with the purchase and sale of investments in a sequence of trading enterprises he formed. He admitted raising tens of millions of dollars from scores of investors and to having 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 maintained he developed and owned. Among other things, Watson 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.

Watson, however, admitted that 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 the Internal Revenue Service Criminal Investigations as well as staff from the SEC in Fort Worth and the Commodity Futures Trading Commission (CFTC) conducted the investigation leading to the charges. Assistant U.S. Attorney Stephen L. Corso is prosecuting the case.

http://www.fbi.gov/houston/press-releases/2011/201calpha-one201d-foreign-currency-trader-convicted-of-securities-fraud

Tags: criminal investigation,