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Scams > Warning
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) today
issued a Consumer Advisory warning the public to use caution before investing
in a commodity pool that makes extravagant claims, even when the investment
opportunity is offered by a friend or relative or someone else they know. In
the CFTC's experience, the fact that you know the person offering an investment
opportunity is not always a guarantee of reliability, particularly when the
person guarantees profits with little risk. The CFTC has brought numerous actions
against persons making such fraudulent offers.
Commodity pool operators are persons or entities who raise funds and "pool" them
together to trade commodity futures and options. Unregistered pool operators
often use word of mouth or e-mail among friends and relatives, religious or
ethnic affiliations, community or social organizations, as well as other networks
of acquaintances, to convince members of the public that they can make money
quickly by investing in commodity pools. In many cases, however, the investment
schemes turn out to be fraudulent, and investors lose their entire investment,
sometimes as a result of outright theft.
CFTC Chairman James E. Newsome commented,
"While the CFTC is doing everything it can to take enforcement action
against unlawful commodity pool operators, we also want to help members of
the public protect themselves against such fraud. Today's Advisory sends a
clear message: before investing in something that sounds to good to be true,
you should check it out, even if the investment is offered by someone you know."
One Fraudulent Operator Preyed on Members of His Cancer Support Group
Investors lose millions of dollars every year in phony commodity pools, including
fictitious "hedge funds" that trade commodity futures and options.
In the last three years, the CFTC has filed 39 actions throughout the United
States involving fraudulent activity connected with commodity pools. Investors
in those pools lost over $110 million in the aggregate. In most of those cases,
the pool operators solicited investments from friends or acquaintances, exploiting
their personal relationships to gain the trust and confidence of investors.
In the CFTC's experience, the promotional activities of these pool operators
often promise quick riches — such as the ability to double or triple
the investor's initial investment in months — with low risk. In one instance,
the CFTC even discovered that a person who was operating a commodity pool fraudulently
had solicited investments from members of his cancer support group.
The CFTC urges investors to be skeptical when told that someone's services
can earn them large profits with minimal risk — even when the person
recommending the trading services is a friend or relative.
Consumers are advised to watch for the warning signs listed below and to take
precautions before trading futures or options with a friend or anyone else,
or giving someone funds to invest in a commodity pool:
Avoid trading through any person, even someone known to you or recommended
by friends, based on promises of large profits with little or no financial
Always take the same precautions to investigate the investment opportunity,
whether you know the trader or not.
Find out whether the person or company is registered with the CFTC or has
any commodity industry disciplinary history by contacting the National Futures
Association (NFA) at 1-800-676-4632, or has a disciplinary history with other
state or local authorities.
Insist on seeing the pool's disclosure documents and performance history.
If in doubt, don't invest. If you can't get solid information about the pool
operator's trading practices, you may not want to risk your money.
To see a copy of the Consumer Advisory, go to the following Internet web address:
www.cftc.gov/enf/enfadvisory-pool.pdf. A list of the 39 commodity pool fraud
cases filed by the Commission since 1998, with descriptive text, is available
upon request from the Office of Public Affairs (202) 418-5080 and is also
available on the CFTC's website.
[Note to editors: The CFTC has also published five other Consumer Alerts,
which can be found at www.cftc.gov/cftc/cftccustomer.htm - advisory.]
Deputy Director, CFTC Division of Enforcement