Currency Trader Who Fled Is Indicted in Fraud Case
New York Times
Becky Gaylord
20 November, 2001
An indictment was unsealed yesterday accusing the owner of a currency trading operation in the World Trade Center of fraud and conspiracy. The owner disappeared after the Sept. 11 attacks, as did $105 million of investors' money.
Word of the indictment, which was unsealed by a federal judge in Brooklyn, came as documents obtained from investors and Australian court files contended that the currency firm, Evergreen International Spot Trading, had misled investors, inflated claims about potential profits and violated the terms under which at least one man invested $1.4 million in currency trades.
The indictment charges the firm's owner, Andrei Koudachev. 38, with mail and wire fraud conspiracy and conspiracy to launder money. Mr. Koudachev is in Russia, his lawyer said last week.
The lawyer. Nathaniel Z. Marmur of Stillman & Friedman, declared that Mr. Koudachev was a victim, not a thief, and that Mr. Koudachev hoped that someone would recover the missing money. "Mr. Koudachev maintains that he is innocent," the lawyer said yesterday.
An arrest warrant was issued last week for Mr. Koudachev a Russian citizen, but the Russian government usually does not extradite its citizens in fraud cases. The indictment also named Gary Farberov, 32, of Brooklyn, also known as Gary Farber, who was president of First Equity Enterprises, the trading arm of Evergreen international Spot Trading. These two companies, which Mr. Koudachev owns, were also indicted, along with the company through which trades were supposedly made, Forex of Budapest.
Mr. Farberov, a United States citizen who turned himself in to the F.B.I. and United States Postal Service inspectors, pleaded not guilty and was freed on $500.000 bail after surrendering his passport. His lawyer, Charles E. Clayman of Clayman & Rosenberg, said yesterday that "many rumors and much false information has been disseminated concerning this matter, and Gary and I welcome the opportunity to set the record straight" in court proceedings.
Employees of First Equity Enterprises escaped from 2 World Trade Center after the terrorist attacks. But when some of the firm’s 1,400 customers began seeking the return of their money within a few days, they were told that it had vanished along with the owner of the two firms.
The investors had received sales materials that went to great lengths to assure them that their money was safe. Investors were told in an October 2000 letter that "all managed accounts are held and administered by our designated financial institution. It added, *Your funds are deposited with Chase Manhattan Bank."
But two months earlier. Chase told the firms that it did not want their business, and it closed their accounts in September 2000. The same letter to investors referred to Forex not as a currency trading firm in Budapest but as "a cash inter-bank or inter-dealer market established in 1971" that operates around the clock handling trades for "central banks, commercial banks" and other major financial institutions in such a huge volume that it "gives you near perfect liquidity."
Even though the sales letter described around-the-clock activity, customer accounts that listed trades as being made indicated that trades had been executed only about 15 times a month.
The letter to investors also promised stop-loss features that protected investors in the event of losses by prohibiting further trades, according to court records in Melbourne, Australia.
Paul Semonov, an Australian customer who is suing to recover nearly $1.4 million that is missing from his account, deposited money with Evergreen under terms that prohibited additional trades if 10 percent of his account balance was lost in trades
The agreement between Mr. Semonov and Evergreen also required Evergreen to insure his investment against theft, but there is no evidence that such insurance existed.
Evergreen sales documents, obtained from another Australian customer, show that the firm boasted of 25 percent annual returns. One document showed that if $5 million was left with Evergreen for three years, it would produce a profit of nearly $4.8 million.
The calculations ignored income taxes, which for a New York resident would take nearly half of each year's gains. Even assuming that Evergreen could consistently achieve 25 percent gains, the after-tax profit would be only about $2.5 million, slightly more than half the amount listed in the sales documents.
Another document listed what were presented as winning trades for the first seven months of 2000, with a total profit of 12.9 percent. But the results were marked "unaudited." Australian residents are generally quite aware of currency values and movements.
When the Australian dollar slipped below 50 United States cents in March for the first time, for example, the news made headlines in newspapers and was prominently reported on broadcast news shows.
Australians are also eager international travelers - the country's 19 million people made 3.3 million overseas trips last year - so many of them are accustomed to dealing in currencies other than their own.
Australians alliances with investments in other currencies, however, have not been blemish-free. Farmers and executives were lured in the 1980's by low-interest foreign currency loans when the currencies strengthened against the Australian dollar, swelling the debts.
