Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading became a common form of fraud in early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission.
The foreign exchange market is at best a zero-sum game, meaning that whatever one trader gains, another loses. However, brokerage commissions and other transaction costs are subtracted from the results of all traders, making foreign exchange a negative-sum game.
Cline was a former house painter from Baker City, Oregon. In 1998 he founded Orion International, specializing in trading foreign currency through a brokerage based in London. They promised returns anywhere from 60% to 200% with very little risk, because of their sophisticated trading techniques.
In August, 2002 Cline notified his customers that he had lost 97% of their money, blaming poor trades and typographical errors, and asked for additional funds to make the money back. In reality the money had been spent on luxury cars, private jets, real estate, and boats. It is estimated that over 600 people invested $27 million in Orion.
On May 8, 2003 a federal court froze all Cline’s assets and prevented any document destruction at Orion. He was indicted along with other Orion employees, including Samantha Vorachith, April Duffy and Nancy Hoyt. In May, 2004 Cline was charged in federal court with 39 counts of money laundering and fraud. Violating his pretrial release he was arrested for possession of methamphetamines in December and placed in the Multnomah County jail.
Duffy, Hoyt and Vorachith were ordered to pay over $1.3 million in restitution to defrauded customers and fines on September 7, 2004. The three defendants consented to the order without admitting or denying guilt, and were additionally barred permanently from trading futures contracts.
In July, 2005 Cline pleaded guilty in federal court to two counts of mail and wire fraud and one count of money laundering, admitting to defrauding investors out of at least $16 million. On February 6, 2006 Cline was sentenced to 8 years and 1 month in the La Tuna Federal Correctional Institution in Anthony, Texas. The sentence was the maximum agreed upon wherein Cline would not appeal his case. U.S. District Judge Garr King said he would have given a longer sentence, having felt Cline had lied to the court and was generally uncooperative, if it wasn’t for his guilty plea. Cline was also ordered to pay over $33 million in restitution.
He was released on March 30, 2012