Opinion ID: 74165
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: Hollander and Patti established Unique in October 1997. At its inception, Unique purported to offer the sale of foreign currency options. Unique advertised heavily on television, newspaper, and the Internet, promising large returns on small investments. These promises were not based on actual investments made by Unique. Prospective investors were sent a packet containing an offering document that described the foreign exchange market, a customer agreement, and a disclosure of risk statement. The original customer agreement explained that the investments would be pooled together and that Unique had sole discretion over the investments. In August 1998, Unique modified its customer agreement by removing the language concerning the pooling of investments and Unique's sole discretion over these investments. After receiving initial investments from investors, Unique deposited the funds into its bank account at Southern Bank in Fort Lauderdale, Florida. Unique sales representatives advised the investors as to which currencies they should invest in and how many puts and calls they should buy. The investor then spoke to a compliance officer, who explained the details of the investment and requested the investors' assent to the purchase. A portion of the investors' funds then purportedly was wired to Capital Management International (CMI) and Asset Management Funding (AMF) in the Bahamas. According to Patti and other representatives of Unique, AMF was a holding company for clearing houses, while CMI was the clearing house responsible for carrying out Unique's option trades. Unique also claims it later contracted with two other Bahamian clearing houses, Forex International (Forex) and Nassau Bay Clearing, Ltd. After the initial investment, Unique aggressively solicited the investors for additional investments. Eventually, however, Unique representatives were extremely hard to reach and often failed to return phone calls. The investors lost significant amounts of money on their investments. From October 1997 until October 22, 1998, Unique raised just over $6.5 million from investors using the above scheme. Of this amount, only $2,489,801 (38%) was wired to the Bahamas to the alleged clearing houses. The remainder of the investors' money was divided as follows: approximately $700,000 was paid to Unique sales representatives; approximately $1.2 million was paid for advertising (including $760,786.32 paid to DRE consulting, a company co-owned by Patti from which he received a substantial salary); approximately $300,000 was paid to Patti, Hollander, and DeAngelis, the lead sales representative; and approximately $1.6 million was paid for business and personal expenses, including checks made payable for 2 car rentals and personal loans. In addition, approximately $644,000 of the investors' funds was distributed to new investors.