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To: Real Man who wrote (88308)	7/25/2002 6:45:27 AM
From: long-gone	Read Replies (1) \| Respond to of 116767

Regulators Combat Forex Futures Fraud Sun Jun 30, 3:04 PM ET By Kyle Peterson CHICAGO (Reuters) - A false promise that an investment in euros would triple within three months duped one Kansas City-area consultant last year into cutting a $15,000 check to a con man posing as a foreign exchange broker. Related Quotes DJIA NASDAQ ^SPC 8191.29 1290.23 843.42 +488.95 +61.18 +45.72 delayed 20 mins - disclaimer Quote Data provided by Reuters The victim, who asked not to be named, said the FX pitchman first called in November, claiming the impending launch of euro notes and coins would trigger a major rally in the currency. It sounded reasonable at the time, so the middle-aged man sent money to the so-called broker to buy futures contracts on euros. "There were several calls from this person asking if I'd be interested in investing," he said. "He promised me there would be no high risk. It would be very low risk with a quick turnaround. So I made the investment, and in the time frame that it was supposed to be returned to me, it was not returned to me." The case is a textbook example of rampant telemarketing fraud in which callers lure would-be investors into fake deals on nonexistent currency futures and options, regulators in the derivatives industry said. The bogus firms use false advertising and sleazy sales pitches to trick the public into investing in the foreign exchange derivatives market. That's why the Commodity Futures Trading Commission and the National Futures Association are improving the way they troll for unlawful FX futures trading firms. When used correctly, currency futures and options provide a way for investors to protect against -- and profit from -- changing exchange rates in the underlying currencies. "The kind of fraud you see in forex boiler rooms is similar to the kind of fraud you see in securities boilers rooms," said Daniel Nathan, deputy director, CFTC enforcement division. "The unique spin that forex puts on it is that they are pitching to people's interest in certainty about the global economic and political situation. These firms have been proliferating." HUNTING DOWN CON ARTISTS Investigators at the CFTC say the noose is tightening around criminals who cheat potential FX investors out of their savings. The Commodities Futures Modernization Act of 2000 clarified the CFTC's jurisdiction over forex retail dealers, streamlining the process by which the commission ferrets out and prosecutes suspected fraudsters. Since the passage of the law more than 18 months ago, the CFTC has prosecuted 13 cases against 60 firms and individuals. Those cases involved about 1,000 customers and more than $76 million in losses. In the 10 years prior to the Modernization Act, the CFTC prosecuted only 30 cases. Meanwhile, the NFA is campaigning for the authority to regulate forex dealers, which would allow the private agency to supervise dealings by smaller firms that do not fit into another regulatory category. "We just want to be able to look at their activities to make sure everything is okay," said Kathryn Camp, NFA Associate General Counsel. FOREX IS FERTILE GROUND FOR FRAUD Forex is a convenient backdrop for investment fraud because hucksters can explain currency prices with easy-to-understand current events, like war, natural disasters and elections, while other financial markets require a more specialized market knowledge. Derivatives, in particular, are a common vehicle for fraud, because, unlike in spot market deals, contract holders do not expect immediate cash settlements. Customers who invest with the fraudulent firms eventually are told they lost their money on the trade. Some customers find themselves unable to reach their broker, and the firm eventually vanishes. "I called and found out the numbers that were being given were fictitious," the Kansas City investor said. "And this person called me back and said he's out of town, that his phone had a problem, and that's why he has not called me back." Swindlers typically prey on the elderly or ethnic groups whose language barriers and unfamiliarity with U.S. finances make them a target for get-rich-quick schemes. A pending lawsuit filed by the CFTC said one customer invested $25,000 of his retirement savings with a firm called Offshore Common Enterprise on the promise that the money would grow to $90,000 within 30 days. Offshore and 18 other defendants allegedly bilked customers out of more than $1 million in a telemarketing scam. A Federal judge this month effectively halted the defendants' operations. Attempts by Reuters to contact Offshore employees were unsuccessful. Messages left on an answering machine for co-defendant, Global Financial Consultants, went unreturned. HOW TO AVOID FRAUD Skepticism is the best defense against fraud, regulators said. The CFTC Web site features a list of tips to help the public fend off scam artists. Topping that list is advice to shun opportunities that sound too good to be true. Any company that guarantees big profits or no risk may be a charlatan, the CFTC said. Beware of firms that offer to trade customers' money in the "interbank market," the commission said. The interbank market is where banks trade among themselves, so non-bank brokers claiming to trade there may be lying. Finally, the CFTC warns that customers should not send money by Internet or mail because it may be hard to get a refund. If an FX trading firm seems suspicious, customers should contact the CFTC at (202) 418-5000. story.news.yahoo.com