Forex trader Ward traded only a fraction of $15M, prosecutors say

Memo indicates how little was invested

April 3, 2008 

JBL Joel Ward 3

Joel Ward, who pleaded guilty to nine felony counts resulting in the loss of $10 million dollars from investors talks to The Modesto Bee on Tuesday morning (03-25-08) in a conference room at The Bee. Modesto Bee/ Joan Barnett Lee

JOAN BARNETT LEE — Modesto Bee

  • Investigation findings

    Michel Robe, associate professor of finance at American University in Washington, D.C., works with the Commodity Futures Trading Association, the federal agency that regulates commodity futures and options markets. He analyzed 24 trading accounts maintained by Joel Nathan Ward for the U.S. attorney's office in Sacramento. Here are some highlights of his findings:
    • Ward collected $15 million from 110 investors.
    • Ward used $3.7 million to make "lulling" payments when investors demanded returns on investments they believed were profitable.
    • Ward and the traders he hired lost $1.84 million of the $2 million they traded. Only two of 24 accounts managed by Ward showed profits, and the profits were less than $1,000.
    • Ward created fictitious Merrill Lynch account statements to show one investor, falsely indicating that he had $9.5 million on deposit.
    • Ward took in more than $1 million from new investors in the weeks before the scheme was detected.
    • Ward paid himself $15,000 a month, or $180,000 a year, and stayed at five-star hotels when he held trading "retreats" in Las Vegas; Fort Lauderdale, Fla.; New York; and London.

Joel Nathan Ward traded only $2 million of the $15 million he took from investors during the 3½ years that he ran a Turlock-based foreign currency fund, federal prosecutors said in legal papers filed Wednesday in U.S. District Court in Sacramento.

The rest of the money was used to prop up various businesses and pay for an extensive marketing scheme in which Ward touted himself as a financial guru who could make millions by betting on the fluctuating value of the world's currencies.

And his trading profits were a paltry $1,000, according to a finance professor who works for the Commodity Futures Trading Commission.

The results of the audit were made public in a sentencing memorandum filed by U.S. Attorneys Benjamin Wagner and Ellen Endrizzi, who argue that Ward should be given the maximum sentence allowed under federal guidelines, or more than 11 years in prison.

"As a trader, he was a failure," the prosecutors said in legal papers. "The only success Ward had was in convincing others that he was successful."

Ward, 49, is asking for a far different sentence, suggesting that he serve his time on home detention so he can keep trading and earn money to repay investors who paid at least $50,000 to join the Joel Nathan Forex Fund.

He declined to comment on the audit, but suggested the professor lacks experience in the forex market.

"They have their expert witness and we'll have ours," said Ward, who sold his Turlock home and lives with relatives in Modesto.

Judge Garland E. Burrell planned to sentence Ward on Friday. Instead, he delayed the hearing to April 25 so a public defender has time to respond to the authorities' sentencing recommendation.

Ward told investors that he misappropriated their money in fall 2006. The FBI arrested him in April 2007. He pleaded guilty to nine felonies in August. He is free on $125,000 bail, though he surrendered his passport and wears an electronic monitoring bracelet on his ankle.

In a recent interview, Ward told The Bee that he dipped into investors' funds because he had a big ego and did not want to acknowledge his losses, then continued to do so because he found he was able to cover his losses.

Prosecutors beg to differ, saying the fund must have been a scam from the start because 85 percent of investors' money was diverted to support Ward and his various businesses.

In legal papers, Wagner and Endrizzi said Ward stole $13 million, using the money to prop up a now defunct Sacramento-based school called Learn: Forex Inc., a Nevada-based firm that invested in a Mississippi land deal that never came to fruition and marketing efforts that touted Ward's trading skills.

They refer to Ward's recovery plan, which would begin with $100,000 from an unidentified source, as a "fantasy" that would need 47 percent annual returns for 10 years to succeed.

"Ward is continuing to con his victim investors by promoting the JNF Recovery Plan," the prosecutors wrote, "when he knows it is just a scheme to minimize his own sentence."

Bee staff writer Susan Herendeen can be reached at sherendeen@modbee.com or 578-2338.

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