Joel Nathan Ward used to be a hotshot forex guru with millions of dollars of managed account money under his control. Now, he’s looking at 9 years of hard time in federal prison along with an order to repay $11 million to investors. Is he a sleazy scumbag who should be grateful for such a short sentence, or a good guy who is being denied a chance to make amends for one terrible mistake?
Before I get started, let me interject a personal story. I HATE scammers. The thought of some thief running off with another person’s money or possessions fills me with rage. This probably dates back to my house being robbed just before my 9th birthday. It was bad enough that they ransacked all of my parents’ stuff, but they dug through my closet and managed to find the box with my coin collection, tucked away in the same place as my Monopoly, Battleship, and chess sets. The thieves that robbed my house were pros and got away with their crimes. I decided it wouldn’t be so easy the next time. I guess that’s why I now have a safe that weighs over 900 pounds, a large dog, and an alarm system.
Normally, I would join the chorus calling for this guy to be hung from the battlements and left to rot, but then I dug a little deeper and the case became more interesting. I still think this guy was wrong, but think it’s worth exploring how and why he went from being a good buy to being a bad guy.
According to Joel, he learned to trade at a California school called Learn:Forex. He claims that his trading became consistently profitable, and he then opened the Joel Nathan Forex Fund. Not too long after, he purchased Learn:Forex. He was well respected in the world forex community and both write his own articles and he was frequently cited by others as a source of good information on forex trading.
According to Joel, the school was losing money when he bought it, and since he’d successfully “borrowed” money from his own fund before and managed to pay it back out of profits, it didn’t seem to be too big of a thing for him to “borrow” more to keep the school afloat while trying to make it more profitable. He supposedly was about to do an IPO on the school and launch a new, larger fund that would have let him easily repay the missing 10+ million dollars when the whole scheme fell apart. He claims all the money was lost and that he only lived in a modest home so hadn’t spent it on a lavish lifestyle. At one point, while overcome with guilt, he described himself as a “financial serial killer”, and expressed deep regrets that he’d become a scammer, but even now remains determined to find a way to repay the lost money.
The Federal prosecutors tell a different story. They say his fund was a Ponzi scheme. The prosecutors say that the missing millions went to pay for Joel’s salary, travel, extensive marketing, as well as other expenses. One of the prosecution’s expert witnesses was a finance professor employed by the CFTC. That witness audited the books and says that Joel was only using $2 million of the $15 million in his fund for trading, and that his trading profits from trading that $2 million came to $1000. (Personal note – Wow, and I though I had a bad time trading!). Joel’s response to this is to say that the professor lacked experience with forex to be able to interpret the account statements. I find this a little hard to believe – I’m not a professor of finance (I don’t even do a very good job balancing my checkbook), but when I first began demo trading forex, it was quite easy to see what my total profits and losses came to. I also had no trouble interpreting any of the Daily Confirmation Statements sent to me by my broker once I went live.
According to the prosecution, “As a trader, he was a failure. The only success Ward had was in convincing others that he was successful.” and “Joel Nathan Ward earned every minute of the nine-year sentence the court imposed.”
Joel did plead guilty to five counts of wire fraud, two counts of mail fraud and two counts of money laundering last year and asked the court to sentence him to house arrest so that he could keep trading to repay the money that his investors lost. The court instead imposed a 9 year stretch in Club Fed along with a requirement to repay $11 million stolen from investors. Joel went so far as to say “I will keep trading. The court can’t stop me from trading.” I’m not a legal expert, but I think it would be well within the power of a Federal judge to impose an injunction against Joel to keep him from trading even after he completes his time in the federal lockup. Prosecutors say that he is very unlikely to ever be able to pay off the debt, especially through trading.
This is where I am torn. Part of me says that he got off way too light and should be forced to sell his internal organs to help repay the money he stole from investors. Another part of me wonders if he really did just make a terribly foolish mistake and should be allowed to trade (under strict supervision) so that his skills might be used to help recover the money that has been taken. Punishment is important, but should punishment be so harsh that it reduces the chances of repayment? Or, will he just find a way to go around any restrictions and scam again?
The prosecutors say his whole company was a scam from day 1. He says it only went wrong when he had to borrow money to keep his other company afloat? Assuming he was a legitimate trader at one time, should this be taken into account when considering a sentence? Does it really matter if he scammed from the beginning as opposed to making a mistake and falling off the straight and narrow?