A recent study showed that more than 900 people bought commodities options in London and received as little as $222,000 in refunds, out of a total of $4.4 million. Many salesmen used phony names and some had prior criminal records. These stories highlight the risks of trading with fraudulent commodity brokers.
IB Capital FX LCC
The IB Capital FX LCC is allegedly a fraudulent commodity broker that solicited clients around the world, offering them off-exchange currency trading services. The company is not registered with the CFTC and was not regulated by the New Zealand Securities and Investments Commission. Its offices were located at 22 Terrace, 6011 Wellington, New Zealand.
The Financial Markets Authority deregistered the company in November 2012, after which it claimed to move its operations to Europe. Its website is no longer up and running, and its withdrawal request page is no longer accessible. The company’s director, Emad Echadi, held the position from December 2011 to May 2014, when it was closed.
While there are no specific laws governing offshore retail commodity brokers, it’s not uncommon for scammers to set up a makeshift office where they pitch bogus schemes and take customers’ money. Fortunately, there are ways to protect yourself from falling victim to a scam. First, it’s important to understand the risks involved. Some brokers are unregulated, which means they can disappear without a trace when confronted. This means that you’ll need to be extra cautious when dealing with such brokers.
When choosing a broker, look into the firm’s operating history. If it’s been in business for more than five years, it’s more likely to be a legitimate firm. Also, check to make sure that it’s registered with a legitimate international financial regulator. Good brokers should make this information readily available on their websites. For example, eToro lists the regulating agencies on its website. Be wary of fraudulent brokers who claim to be regulated by bogus agencies. Such organizations often lack independence and authority to fine or sanction offenders.
The CFTC has found that Savage and his company AITC were guilty of a scheme to defraud customers. These schemes included “wash sales,” which are orders that had no effect on the customer but generated commissions for AITC. The companies also engaged in prearranged trades with customers on the MidAmerica Exchange, allowing them to make substantial profits. Further, they engaged in “Robin Hood” transactions, in which they allocated the profitable sides of offsetting trades to customers with declining equity, requiring AITC to meet margin calls.
Savage’s conviction stems from his failure to meet the statutory requirements for being a registered trading advisor. A prior felony conviction in the securities industry disqualifies a potential trading advisor from obtaining a license.
The Commodity Futures Trading Commission (CFTC) charged Savage and AITC with schemes to defraud customers. These schemes included wash sales – orders that had no effect on the customers but generated commissions for AITC. In addition, Savage and an AITC adviser entered into prearranged trades for customers on the MidAmerica Exchange, which allowed them to make large profits. The defendants also engaged in “Robin Hood” transactions, in which they allocated the profitable sides of offsetting trades to customers with declining equity that required them to meet margin calls.
In AITC’s case, Savage was the advisor to a group of AITC customers through the Managed Account Program. Berman made investment decisions on the customers’ accounts, while Savage prepared portions of the commodity advisory letter.
The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against a New Jersey man and a New York firm accused of engaging in a deceptive and manipulative scheme. The two men allegedly used their positions as commodity brokers to deceive investors. The CFTC said it appreciates the assistance of the National Futures Association and the New York Division of the Federal Bureau of Investigation, which assisted in the investigation. The CFTC has also appointed a temporary receiver and has scheduled a hearing in the case.
While cooperating with CFTC investigations may seem like the best way to avoid potential liability, this tactic can backfire. The investigation team is likely to make many requests over a long period of time, and it may result in further legal action against the individual or company. That’s why it is a good idea to consult with a CFTC defense attorney for advice on the best course of action. It may be possible to avoid prosecution altogether or at least obtain a favorable resolution if you take action early.
The CFTC and the Financial Industry Regulatory Authority (FINRA) have jointly announced settlements with Interactive Brokers LLC for failing to file Suspicious Activity Reports on U.S. microcap securities trades by some of its customers. The settlements were reached after Interactive Brokers agreed to pay a combined $11.5 million penalty and hire an independent compliance consultant.
Commodity market manipulation, or “pump and dump” schemes, can result in losses worth billions of dollars. These schemes typically involve inflated trading volumes to increase the price of a target security. The perpetrators then sell the inflated security into the market, resulting in illicit gains for the fraud perpetrators and losses to innocent third-party investors.
The Securities and Exchange Commission (SEC) has announced that it has filed fraud charges against Empires Consulting Corp., a company that operated out of Canada. Its founders, Emerson Sousa Pires and Flavio Mendes Goncalves, and head trader Joshua David Nicholas, raised $40 million through an elaborate scheme in which they lured investors with promises of daily profits. In fact, they misappropriated large sums of money.
The SEC has named five people as defendants in the case. The SEC also has announced that it will pay approximately $180 million in restitution to the victims. The SEC also expects to recover more than $100 million in investor losses. The SEC imposed the penalties as part of a recent settlement agreement.