The United States Commodity Futures Trading Commission ('CFTC') warns consumers to take special care to protect themselves from the many types of commodities fraud being perpetrated in today's financial markets. The CFTC is the federal agency that regulates commodity futures and options markets in the United States. We have seen a great increase in the number of scams that falsely promise high profits with low risks. Many of these scams are targeted at ethnic communities in their language, from New York to South Florida and from the Southwest to California, among other areas.
The public should be wary of any firm that offers to sell commodities or commodity futures or options. They might be selling precious metals, such as silver or gold, or on foreign currency, such as Euros, Yen or Deutschmarks. They might be selling futures or options on precious metals or foreign currency, or on other commodities such as crude oil, heating oil, unleaded gas, or agricultural products such as corn, soybeans, or cattle. The firm might be offering to manage your money for you to trade in commodity futures or options, or to pool your money with other customers. If a firm offers any of these investments, and promises high profits and low risks, or claims that they have made profits for all of their customers, you should not believe them without proof. The commodities and futures markets are very risky, and you can lose your entire investment very quickly. Anyone who claims otherwise might be breaking the law.
Foreign currency trading scams often attract customers through advertisements in local newspapers, radio promotions or attractive Internet sites. These advertisements may tout high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly. Precious metals scams often work the same way.
Commodity pool operators often solicit investments from friends, neighbors, co-workers and fellow religious or social group members by using their reputations in the community or their personal relationships. In many cases, however, the investment schemes turn out to be fraudulent, and investors lose their entire investment, in many cases as a result of outright theft. Individuals and firms that fraudulently solicit funds from investors for commodity futures and options trading are usually not registered with the CFTC. They may operate 'Ponzi' schemes in which little or none of the money sent in by investors is ever invested as promised ' in the commodity markets. Instead, the operator of the scam steals the funds, and creates the illusion of a successful business by using some of the money put in by later investors to pay phony 'profits" to earlier investors. This tactic makes it appear to investors that the investment is actually making money, which in turn attracts additional investors. Be wary of such payouts if you do not fully understand the source of any purported profits.
Introducing Brokers often use advertisements on radio and television, as well as infomercials ' program-length television commercials ' to promote commodity futures and options. These advertisements may claim that seasonal trends in the demand for certain commodities or well-known current events create an opportunity to make big money by trading in commodity futures and options. The advertisements and infomercials promise quick riches ' such as turning $5,000 into $20,000 in just a few months ' with predetermined risk. The CFTC has brought actions against wrongdoers who lured customers by claims that one could earn large profits with little risk based on predictable seasonal demands, published reports, or well-known current events.
Warning Signs of Fraud
1. Stay Away From Opportunities That Sound Too Good to Be True
Get-rich-quick schemes, including those involving foreign currency trading, tend to be frauds.
Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.
2. Avoid Any Company that Predicts or Guarantees Large Profits
Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.
Be sure you get all the information about the company and its track record and verify the data. If you can, before you invest with any company, check the company's materials with someone whose financial advice you trust
3. Stay Away From Companies That Promise Little or No Financial Risk
Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.
If in doubt, don't invest. If you can't get solid information about the company and the investment, you may not want to risk your money
4. Question Firms That Claim To Trade in the "Interbank Market"
Be wary of firms that claim that you can or should trade foreign currency in the "interbank market," or that they will do so on your behalf. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.
5. Be Wary of High-Pressure Efforts to Convince You to Send or Transfer Cash Immediately to the Firm, via Overnight Shipping Companies, the Internet, by Mail, or Otherwise
6. Be Skeptical about Unsolicited Phone Calls about Investments, Especially Those from Out-of-State Salespersons or Companies with Which You Are Unfamiliar
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