A Hilo, Hawai'i, firm at the heart of an alleged $2.2 million Ponzi scheme went to great lengths to impress potential investors, renting a $25,000-a-month Kahala beachfront home, leasing expensive European cars and doctoring account statements to project an image of success.

Those are among the allegations contained in a complaint filed by the U.S. Commodity Futures Trading Commission, which last week filed court documents to bar the Big Island-based WeCorp Inc. and its two principals, Stuart W. Jones and Payton J. Lowe from further commodity trading.

A review of the documents filed by the CFTC, in addition to similar action taken by state Commissioner of Securities Tung Chan, alleges WeCorp took steps to portray itself to investors as having "Golden Goose" software that never lost money and automated trading of commodities.

The case and supporting documents filed in U.S. District Court allege the company almost burned through all investor funds because of trading losses and spending on "luxurious lifestyles" that included manicures, travel and gift purchases that included those from Sensually Yours, a Honolulu lingerie store that also sells adult items.

"Defendants failed to disclose that they were experiencing trading losses in WeCorp's forex account, misappropriating WeCorp investor funds and that any returns on investment provided to WeCorp investors came from either existing WeCorp investors' original investments or money invested by subsequent investors," the CFTC filing said.

'WE'RE NOT CRIMINALS'

Calls to WeCorp went unanswered yesterday. Jones, reached at his home, said he couldn't talk about the case until he retains an attorney and noted everything released so far has been one-sided.

The allegations are "false but they're serious," said Jones, 54.

"I'd love to talk about it and give our side of the story, but I think that would be unwise.

"We're not criminals. It will come out and it will be a different story."

The state last week issued a preliminary cease-and-desist order against the firm along with Jones and Lowe, WeCorp's president and vice president, respectively.

The state alleged the defendants were selling unregistered securities to investors in several states as part of a Ponzi scheme in which new investor money was used to pay off older investors.

"Ponzi schemes usually burst when the perpetrators can't cover the payments," Chan said. "When everyone is getting the money no one complains to us."

The CFTC court filings allege WeCorp promised 20 percent monthly returns to investors by employing an automated trading system that never lost money.

In doing so, the firm issued false account statements and lied to potential investors about its success, the filings allege.

ORIGINS IN HILO

The firm, which started up last year in Hilo, first looked at a real estate business before deciding on investing in off-exchange foreign currency contracts, though none of the principals had extensive experience in the business, the filings said.

But the company had problems developing the automated system and represented itself as being successful even as they made investor presentations on the Big Island, O'ahu and on the Mainland.

Those presentations included Jones' renting a beachfront Big Island home to pass off as his own during a presentation to a California investor, the filing claims.

The CFTC filing alleges that WeCorp employed inexperienced traders to handle investments because of glitches in the software development. It never invested some money, instead using it to fund living expenses, including leasing Jaguar and BMW cars, the court documents allege.

But three WeCorp workers that weren't participating in the fraud became suspicious about the firm's promises and in February went to state regulators with their concerns, the court documents say. That led to the state and CFTC investigations.