Investors’ Funds Filched by Phony Forex Funds
by Paul Springer
Although the Madoff mess heightened public awareness of financial scams, fraudsters just seem to be getting more industrious.
While the equity markets are more transparent and less exotic, foreign currency is still obscure enough that many investors are unaware of its perils.
The lure of easy money from currency trading is an old one, but apparently the hooks are still sharp. In one recent blowup, convicts were even bamboozled into investing by a fellow inmate already behind bars for an earlier Ponzi conviction.
Here are some legal actions involving operations where there was little or no actual currency trading. Corrupt portfolio manglers just used the term “Forex” in the pitches and then invested it incompetently or lined their own pockets with it.
The Securities and Exchange Commission and Commodity Futures Trading Commission have taken action against several such operations recently.
Boston Research and Trading inveigled $40 million out of investors who thought they were funding an oxymoronically safe Forex program, the SEC said in a statement. The commission has asked for a restraining order against the company, which allegedly duped investors with phony claims and bogus trade data. Investor cash went to personal expenses including cars and a house in Florida, the SEC claims.
A CFTC action against M25 Investments and M37 investments led to a court order demanding over $16 million in customer refunds and more than $7 million in penalties. Aside from claiming to beat Warren Buffett’s returns, the firms targeted the most helpless victims – elderly people through their churches, according to the CFTC.
A CFTC order says that the companies were really Ponzi schemes that squandered some funds in trading and tried to pay older investors with cash from new ones. Some investors were told an initial investment of $100,000 would grow to $1 million in one year.
The CFTC says another Ponzi scheme was run by principals including one fellow already in prison who suckered other inmates into a bogus Forex scheme. Talk about the crime being its own punishment!
The head of that operation is currently a fugitive from justice. Investor cash also exhibited flight risk. Dupes were promised guaranteed returns and in some cases induced to sell their homes to fund worthless investments.
Retail trading of currency through individual accounts is no walk in the park either — check out TraderDaily’s recent story on some dirty games played by brokers.
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