Commodities / Futures
/ Options Investment Frauds
Count Your Blessings
After starting an investment fund known as Hedged Investments
the owner attracted investors by claiming he had developed a sophisticated
method of trading in stock options which resulted in substantial
returns. Upon enticing someone to invest, he sold them units in
one of three limited partnerships that he had established as investment
vehicles for the fund.
He told investors he would invest partnership capital from the
fund according to his trading strategy. Though he actually did
use investors' contributions to trade in stock options, the fund
amassed enormous trading losses.
To hide these losses, he reported false earnings and allocated
false profits to investors' accounts. He then allowed investors
to withdraw cash from their accounts on the basis of these falsely
attributed profits. In effect, he ran a Ponzi scheme —he
paid these so-called profits to investors who chose to make cash
withdrawals, from the contributions of other investors.
While hundreds of people collectively lost hundreds of millions
of dollars in the Hedged Investments scheme, one lady, after making
over a million dollars over and above her initial investment, sued
after it collapsed because she didn't get all that she was promised.
Over the course of her participation she invested about $750,000
in the fund and received transfers totaling a little over $2 million.
She was among the very few investors who received more money than
they had invested, as opposed to the many who lost every cent they
had.
A Cut in Corporate Profits
A well-known Beverly Hills-based money manager convinced a large
company to invest some of its excess cash with him. He told them
that he could outperform Treasury securities by using certain proprietary
strategies.
That year the company's brokerage trading account statements seemed
to show large losses but the account statements which the money
manager prepared appeared to reflect healthy profits. When questioned,
he lied, claiming they definitely had gains. The company
became concerned when they learned that his options trading was
highly risky.
Unable to determine what he was doing and uncertain whether the
company had gains or losses, they asked for their money back. He
promptly returned all the company's money with a sizable profit
- but not through liquidating their investments, as he claimed.
Instead, he raised the money by secretly transferring out other
peoples' money through a misallocation scheme.
For two years he misrepresented his strategy as fully- hedged
and low- risk. Unbeknownst to anyone he was commingling the company's
funds with other investors' funds, placing futures trades, and
routinely shifting profitable trades to some clients and losses
to other clients through massive trade misallocations, while simultaneously
generating enormous commissions, fees, and income for himself.
The following year, the company gave him another shot, by investing
$28.1 million, but told him to buy only short-maturity Treasury
securities. Instead, he covertly shifted almost all of the company's
money back to other clients who wanted to cash out of the accounts
which he had previously plundered.
Within six months the company again questioned his trading. When
confronted, he admitted that he had engaged in unauthorized options
trading. He then told the company that it would have a very sizable
$2 million loss if he liquidated their investments right away.
In reality, the losses amounted to $26 million.
Relying on his version of events, they instructed him to try to
recoup the company's losses, and to do so he placed increasingly
risky bets in Treasury options for their account. Finally, when
it was determined that he could not recover any more of the company's
funds, the company disclosed to its shareholders that it had lost
$15.9 million on its investments.
What Did You Learn, Class?
One enterprising fellow offered a "Treasury Bond Futures" trading
course to the public, promising to teach a trading methodology
that would yield high returns over a short period. He offered a
double-your-money-back guarantee if students did not earn at least
a certain weekly sum after using the process for a few weeks.
He stated that he was an experienced and successful futures trader
whose successes resulted in an opulent lifestyle. He was, however,
neither experienced nor successful as a commodity trader and was,
in fact, verging on bankruptcy.
He would show account statements for his own account reflecting
phony trading profits to reinforce his assertions that he was a
profitable, high-volume trader. He claimed to have taught
students to become successful traders using his trading methods,
when in fact he hadn't. He also never returned any tuition
payments.
Micro Profits Macro Losses
Knowing that you need an edge in the highly technical world of
futures contracts, you investigate a company you see at a business
and franchise exposition which sells a computerized commodity futures
trading program called the "Micro-Trading System."
"Financial Business. Average $625 / day before noon from
home w/ no employees, no sales, no inventory. YOU CAN TOO. Not
MLM or anything you've ever seen. GUARANTEED. $25K req."
"CASH MANAGEMENT SYSTEM - The surest, safest way to getting
rich in America is gradually, easily, day by day. If you are
open to new ideas. Come watch how I make $500 right before your
eyes in 2- 3 hours. Call 305/938-1177."
The Micro-Trading System analyzes historical and real-time market
data supplied by a quote service, and then generates various technical
indicators which are displayed on twenty split-screen computer
windows.
They tell you that the technical indicators will show you the
direction of the Swiss Franc futures market, and indicate when
and where to enter or exit the market and when to buy or sell Swiss
Franc futures contracts.
"On each investment you can earn as much as $1,250 and
there are usually an average of two to four such investment opportunities
a day before noon. That's a potential $2,500 a day profit! Plus
your own Personal Global Trading Station shows you which opportunities
these are —when to buy and when to sell —It's
just that easy!
They are so certain you will consistently make profitable trades
in the Swiss Franc futures market, by relying on the system, that
they guarantee that you will yield an average of $625 in profits
before noon each day.
You are encouraged to attend demonstrations at their office suite
to learn more about the system. During these demonstrations you
are led to believe that there is little risk of loss as they guarantee
that 80% of trades will be profitable and only 20% of trades will
result in losses.
They say the vast majority of actual purchasers are using the
system successfully and reaping profits; that you will have between
eight and fifteen winning trades and between two and four losing
trades per week, or that earnings from your winning trades would
be three times as large as the losses from your losing trades.
They also say that they have been using the Micro-Trading System
to trade successfully for a house account for approximately three
years; with $277,000 in profits its best year and approximately
$252,000 in profits its worst year; and that you will make a quarter
of a million dollars, by trading ten Swiss Franc futures contracts
each business day, over the course of a year using their system.
The total cost of the system is $75,000. In return, you are to
receive a personal computer containing the Micro-Trading System,
a five day training course and ongoing advice. You are required
to pay $15,000 up front plus 10% of your profits each month, or
$5,000, whichever is less, until the balance is paid. Under the
terms of a lease agreement, you also agree to pay a monthly fee
for the transmission of market price quotes. With such assurances,
you sign on the dotted line.
During the training seminar, you are told that although the system
is adaptable for trading in other markets, namely Deutsche Mark
and S&P futures, it was designed specifically for micro-trading
in Swiss Franc futures.
They also provide you with a written training manual and explain
how the technical indicators contained on the various charts and
graphs will pinpoint the direction the Swiss Franc market is moving,
so you know when and how to react.
Their ongoing advice includes daily critiques of your faxed trades,
refresher and remedial follow-up courses, and access to daily voice-mail
messages recounting the specific Swiss Franc futures trades which
you should have made the previous day based on the technical indicators
and upcoming economic reports which might have affected the Swiss
Franc market.
Based on the $15,000 down-payment cost, they collected at least
$2 million from customers before being charged. Of the 123 trading
accounts opened by their customers, trading statements reveal that
109 or 89% of the account holders had net trading losses. They
further reveal that these accounts had gross trading losses of
approximately $548,992 and gross trading profits of approximately
$12,956, resulting in an overall trading loss of approximately
$536,035.
Weather Psychics
You see an ad urging you to call about investments of commodity
options because increased demand for heating oil in the winter
is likely to push up prices.
INVESTOR ALERT!
Did you know heating oil is an investment traded every day
by clever speculators all over the world? Find out how a
five thousand dollar investment, could control $168,000 worth
of heating oil.
"It won't be long before cold weather is
here. Heating oil inventories are down and demand is going
up. There are warnings about shortages already. Get the facts
on how $5,000 properly positioned can return $20,000 or more
with just a ten cent move in heating oil prices. Past performance
is not indicative of future results and people can lose money. "
"Low supplies and high demand equals higher
prices. Get the strategies now by calling 1-800-HOT-TIPS. $5,000
can return $20,000 or more, but timing and strategy is the
key. "
This offer can only be extended to a limited number of people,
so be sure to reserve your spot today!
In the spring, such ads may tout commodity options in unleaded
gasoline because increased consumption in the summer is likely
to boost prices. Or perhaps they use certain agricultural commodities
because El Nino has driven up prices, or a recently-issued government
report which has described shortages.
The fact is the market has already factored seasonal demand into
the price of futures and options. The same is true of well-known
information like El Nino or government reports. The markets respond
immediately, within a few hours, often a few minutes to new information.
In other words, the prices of commodity options and futures contracts
already take into account all known or predictable market conditions,
such as seasonal changes in demand for a commodity or known shortages
of a commodity. The advent of the summer and winter seasons, or
the latest United States Department of Agriculture report on crop
size, is not news that is known only to a select few.
A Bumper Crop of Crooks
The most common charges
made against brokers who have defrauded people in a commodity pool
investment are:
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they
misappropriate the funds received from you; |
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they
fraudulently guarantee trading profits; |
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they
represent that your funds will be used only to trade commodities
when they are used for non-authorized expenses of the pools; |
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they
fail to disclose the fees and commissions that will be charged; |
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they
misrepresent the trading experience and track record of the
individual who makes the investment decisions for the pools; |
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they
falsely inform you that your funds have been frozen by the IRS, in
order to conceal from you that your funds are in fact gone;
and |
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they
routinely issue altered and false account statements that
show that your trades are profitable when they are not, as
well as misrepresent the value of pool assets. |
U.S. Commodity Futures
Trading Commission,
Division of Enforcement,
Three Lafayette Centre,
1155 21st Street, N.W.,
Washington, DC 20581
(202) 418-5320.
Stacking Money More Fun
Edward W. Knipping, 55, whose last job was as a supermarket stockroom
clerk collected about $6 million when he lied to 1,200 people in
40 states, Canada and Australia about investments he was supposedly
making in the commodities futures market.
Knipping, who pleaded guilty to wire fraud and faces up to 30
years in prison and fines, had no formal education or experience
in the financial world but nonetheless founded Time Traders Inc.
and Time Traders Investment Group in 1999 and began soliciting
investments.
He managed to lose about $1.3 million on the investments, kept
about $1 million in Maine bank accounts and paid about $1.3 million.
The rest is as yet unaccounted for.
This was the second biggest case of investment fraud in Maine
history topped only in 1999 when Catherine Duffy Petit was sentenced
to more than 15 years in prison for masterminding an investment
scam in which 140 Mainers lost nearly $8 million.
A Whale of a Lie
09/17/02 WASHINGTON, D.C. - The U.S. Commodity Futures Trading
Commission filed an enforcement action in federal court in Florida
against defendants Donald C. O'Neill, and eight interrelated companies
he owned, controlled, or managed.
The companies named are: Frecom Technology, a Delaware
corporation, Shelaley Holdings, LLC, a Nevada Corporation,
and Momentum Trading Group, Inc., NDT Fund, LLC, Orca Funds,
Inc., Orca Capital Fund A, LLC of Florida, Orca Mohave
A, LLC and Orca Hopi A, LLC, all Florida corporations.
He referred to some of the companies as a "foreign currency
hedge fund" or an "alternative asset management" firm.
They are charged with fraudulent solicitation and with misappropriating
at least $10.6 million of $13 million from 29 investors for the
purpose of trading foreign currency futures contracts then using
the investors' money for business, personal, and luxury expenditures
between January 2001 and continuing through at least July 2002.
The complaint also names as relief defendants his wife, mother-in-law
and brother who allegedly received investor funds. A federal court
order freezes the assets of the defendants and prohibits the destruction
of documents.
O'Neill spent at least $5.75 million to finance an extravagant
lifestyle that included a nearly $3 million home for himself and
two other houses for his wife and mother-in-law in an exclusive
Florida coastal community; several high-end automobiles; more than
$900,000 in airplane charters; and junkets to Las Vegas over a
period of 45 days that resulted in gambling losses of over $800,000.
According to the complaint, defendants even traded some portion
of investors' funds and sustained an overall net trading loss of
around $487,000.
When soliciting the funds and attempting to lull investors who
inquired about their investments O'Neill claimed to have hundreds
of millions of dollars under management, although he never did;
to have substantial trading experience with a financial firm that
did not exist; and to have traded investors' funds at two brokerage
firms, when those firms, in fact, were only corporate accommodation
addresses that O'Neill created, and never existed as going concerns.
Among the victims of the fraud were two groups of Native American
investors -- the Fort Mojave tribe and the Hopi Tribal Housing
Authority. Their investments represented nearly $10 million of
the total money raised in the scheme.
In its continuing litigation, the CFTC is seeking preliminary
and permanent injunctive relief, an accounting, restitution to
customers, disgorgement of ill-gotten gains, and civil monetary
penalties of $120,000 or triple the monetary gain, whichever is
greater, for each violation of the Commodity Exchange Act.
CFTC Division of Enforcement staff responsible for this case include
Susan Bovee, Wendy Z. Woods, Ghassan Hitti, Patricia Gomersall,
and Alan Edelman.
Secured Currency Investments, Inc. ran a $2 million foreign
currency trading scam. 04/08/03
The owner of the firm, Eric Weichselbaum, 33 of West Hollywood
and Frank Southerland, 63, of Deerfield Beach, Florida were
charged in a 29-count indictment for a foreign currency trading
scam.
Weichselbaum set up the firm in 1998, he hired some employees,
including telemarketers, to use phone and mail contacts to persuade
investors living in various states to open trading accounts.
His company advertised itself as a foreign currency options trading
house, with affiliates overseas clearing firms in the Bahamas and
Switzerland. The court documents indicated that investors who opened
trading accounts with the firm were told that their money would
be used for overseas investments in the international foreign currency
options market.
Instead, the vast majority of their money was never transmitted
overseas or used for the investments claimed, but instead were
misappropriated by Weichselbaum and other employees as commissions
and other payments.
In his plea agreement, Weichselbaum acknowledges that investors
sent at least $2,463,690 in his company, and that in most cases,
when they tried to get the money back it was never returned.
Weichselbaum will be sentenced on September 15, 2003. He can receive
a sentence of 15 years in prison. Southerland will go to trial
on June 3rd.
BE WARNED THE FOREX WEBSITE for Capital Growth Online Ltd. AT
www.capitalgrowthonline.net is a con and a solicitation to be defrauded.
The website is run by NATALIA RIGO. She is the mistress of WILLIAM
FOGWELL who is in jail in Monaco on fraud charges after he defrauded
$70 million from clients of HOBBS MELVILLE.
Do not be taken in by this transparent attempt to steal your money.
Bank
transfer details: from website designed by Andrey Zhuk
(Web Design Studio - BYStyle Group )
First
Union Bank of Delaware
Wilmington Delaware
ABA is 026005092
Routing # is 031100869
Account # is 2000010917327
Swift Code is PNBPUS 33
Account name: Riggs&Norman,Inc.
Checks
should be made payable to Riggs & Norman, Inc and forwarded
to their New York office, 67
Wall Street, Suite 2411, New York, NY 10005-3198.
Above
application to be followed by signed Customer Agreement Form
to be mailed to Riggs & Norman Inc., New
York office, 67 Wall Street, Suite 2411, New York, NY 10005-3198.
For info and due diligence on Forex investments see www.moneytec.com
It is my firm belief that there is a 100% certainty of losing
your money if you invest in foreign currency options.
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