CFTC stands by entry of default against FX Ponzi scheme 1st Million

A couple of months after the United States Commodity Futures Trading Commission (CFTC) managed to secure entries of default against Forex Ponzi scheme 1st Million and the individuals linked to it, the regulator faces a challenge to this achievement.

Two of the defendants in this case – Arley Ray Johnson and John Frimpong, a/k/a Dr. John Erasmus, want the entries of default against them vacated. Now, the CFTC is trying to defend the entries and show that the Court was right in issuing such notices, as the defendants have failed to act in a timely manner and respond to its Complaint according to the deadlines set by the law.

Let’s recall that, that this case was filed by the CFTC in August 2020. It charges Dennis Jali, a South African citizen who previously resided in Maryland, with orchestrating a $28 million Ponzi scheme. The complaint also charges Arley Ray Johnson and John Frimpong of Maryland with fraudulently soliciting funds from members of the public for the “1st Million Pool” through and on behalf of 1st Million LLC, Smart Partners LLC, and Access to Assets LLC.

The complaint alleges that the defendants fraudulently solicited participants to trade in Forex and digital assets such as bitcoin through pooled trading accounts controlled by Jali.

According to the complaint, from 2017 to 2020, over 1000 participants contributed at least $28 million to the 1st Million Pool, often pursuant to so-called “secure contracts” that falsely promised participants’ funds would be held in trust or escrow, used to trade Forex and bitcoin, and then returned in their entirety at the end of the pool participation term. The complaint alleges that the defendants misappropriated at least $7 million of 1st Million Pool funds and used it to pay for expensive cars, personal travel, and living and business expenses.

In May 2021, the CFTC secured entries of default against the defendants, as they have failed to respond to the complaint. About a month later, Arley Ray Johnson and John Frimpong challenged the entries.

The latest filings with the Maryland District Court show that the CFTC is opposing the defendants’ motion.

Defendant Arley Ray Johnson was born in 1959 and, upon information and belief, currently resides in Bowie, Maryland. Beginning in or before May 2018, Johnson became the Chief Operating Officer of 1st Million and was responsible for accepting participant funds and issuing so-called return payments, paying the lease for the Defendants’ offices, and managing payroll, among other duties. Johnson has never been registered with the Commission in any capacity.

The CFTC notes that “Johnson had 189 days on which he just sat on Plaintiff’s Complaint and did nothing about it”.

Defendant John Frimpong, a/k/a Dr. John Erasmus, was born in 1980 and, upon information and belief, currently resides in Upper Marlboro, Maryland. When communicating with participants and prospective participants, Frimpong held himself out as the “VP Sales & Marketing/Licensed Trader” or the “Managing Partner/ Blockchain Analyst” at 1st Million, as well as a “seasoned IT professional.” Beginning in or before March 2018, Frimpong has created marketing materials for 1st Million, organized promotional events, and solicited participants for the 1st Million Pool. Frimpong has never been registered with the Commission in any capacity.

The CFTC says that “Frimpong had 210 days on which he also just sat on Plaintiff’s Complaint and did nothing about it”.

The regulator argues that defendants Johnson and Frimpong have failed to allege any meritorious defenses and have failed to file any proposed Answer to the Complaint along with their Motions. Both Defendants have failed to raise any affirmative defenses, and both have failed to introduce any facts to support a position in opposition to the injunctive relief, civil monetary penalties, and other equitable relief sought by the Plaintiff Commission, either by Affidavit or in a proposed Answer.

That is why, according to the Commission, the entries of default should be sustained.

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