NYMEX Clerk to Pay $3.6 million for Fraud

This is getting a bit off my currency trading fraud focus, but there's something about fraud committed by bitter clerks that's just irresistible.

The CFTC recently announced that it's making NYMEX clerk Matthew Doyle pay back about $3.5 million to his employer, a NYMEX floor broker.

Doyle attempted to assign losing natural gas futures trades to client accounts, and then to his boss's account when the first plan fell through.

The great thing is the extent of the damage that come from the actions of a seeming bit player in the futures circus. Of course, if you screw up really big time in energy futures, there's a special term for it: Amaranth.

Don't know if the guy still has the $3 mil to pay back . . . .

Fake FOREX Futures Finaglers Find Time on Their Side

How do con artists rip people off with FOREX trading scams? The "brokers" make the usual appeals found in other financial scams:

• Invest now before it's too late!


• You'll make tons of money!


• Trust us--we're experts!

A representative case is described in the U.S. Comodity Futures Trading Commission order imposing about $6 million in sanctions against Florida company (Florida!) Global Atlantic Management and the ass running it, Steven Labell.

In short, Labell's broker's used scripted pitches to lure in customers while touting huge pofits--even as they avoided discussing the risks and the firm's abysmal track record in investing.

At least 241 customers lost substantially all their assets.

But at last justice is served. Better make that at long last--the recent action stems from a complaint filed three years ago, and the robbing had been going on before that.

The caveat: given Florida's demographics, at least some of those who were scammed are dead by now, even if the perps have any money to disgorge.

Image from the FBI White Collar Crime site.

Scam of the Year Award: the Mercorella Scheme

Australian securities regulator ASIC recently put forth its nominees for the Pie in the Sky Award, which goes to the most outrageous scam of the year.

Below is the skinny on the victor, but I'm confident the U.S. can provide more outrageous scams, and future posts will be the proof of the pudding.

The ASIC award went to something they call the Mercorella investment scheme, which offered the vics a return of 36% annually. That's insane enough, but suckers were lured in with the promise that they could double the return to 72% by convincing friends and family to kick in more dough.

The similarity to multi-level marketing ploys is worth noting. So is the preposterous rate of return. Sure, you might get that return with a multi-million dollar investment in the right place, but you'll probably never have the capital and the opportunity at the same time.

The Mercorella Ponzi scheme ultimately cost investors $76 million.

Next step--defining Ponzi schemes and taking a look at the wreckage from a few in the U.S. . . . .

FOREX Trading: The Fastest Way to Lose Your Shirt

Before getting into the grey areas and clearly illegal stuff I promised, it's appropriate to lay out some basic realities about foreign currency, or FOREX, trading.

In short, FOREX trading is being marketed to individual investors like the malt liquor of the financial world.

Successfully trading foreign currencies requires a lot of highly specialized knowledge and capital. The arena is full of big players--international banking groups, hedge funds, and governments and their treasuries. Not the place for most individual investors.

But several things happened to make it very easy to market to those who should stick to mutual funds, or maybe even savings accounts.

Thanks to the fall of the Russian Ruble and the appreciation of the Euro, it became easy to market directional currency trading--the kind where you buy and hope to hell the price keeps going the way you want it to. However, investors still get their faces ripped off in these scenarios, and it's even worse when folks use leverage--borrow money via margin--and attempt to make money in the short term.

And the rise of internet trading platforms has taken place concurrently with internet-based marketing designed to harvest cash through ill-advised use of any number of online trading platforms.

And while FOREX used to require a big down payment, it's now possible to open a $250 "mini" account with a lot of leverage, so you can lose more than you had in the first place.

Now this is all the legal, above-board stuff. Wait'll you see what happens when you add in some good, old fashioned snake oil. I mentioned the phony fakir in a previous post--the futures trading guru who had no talent except in convincing people to believe he had talent.

Multi-million dollar FOREX scandals coming up . . . . .

Image from essays & effluvia.

The Fountain of Youth: Available Now

You might think of this as my "garbage stock" post of the week: Phyto Labs.

This morning I got spam from StreetInsider.com, a source of some of the most hilarious garbage stock pitches you'll ever see. The pitch here: sell your Merck and buy Phyto Labs.

And why not? According to its website, Phyto Crap has "been able to begin turning the tide of the disastrous health situation of the north American population." And its stock is going from a buck to $10! Get your "anti-aging doses" now!

What utter bullshit.

Some points of order for identifying garbage stocks:

• You hear about it from spam.



• The company posts press releases about mundane developments.



• The company posts a press release announcing the hiring of a public relations firm to tout its stock.



• Claims are outrageous and/or idiotic.



• It tries to get you to exchange a legitimate investment for garbage.



• The spam is made to look like research of some sort.



• The promised return--900% in this case--is outrageous.



• The company or its promoter is based in Texas or Florida (this promoter's in Plano, TX, a notorious hive of con artists).



• Seemingly sincere discussion of the stock on bulletin boards. All that dialog is a drama designed to get your attention. It's produced by scripted touters and bashers.

The lure of easy money is always at the bottom of these things, be it stock promotion or Ponzi schemes. The art is in making the unbelievable return seem believable just long enough to harvest the suckers' assets.

If you received spam solicitation for garbage stocks, be sure to forward it to spam@nasd.com. It only takes a second, and you could actually help someone else down the line avoid getting screwed.

Image from here.

"Guru" A Fakir in Two Areas: Psychology and Futures Trading

I'm starting off easy here with a post a relatively harmless trading scheme. According to the Commodities Futures Trading Association, this character Richard McCall used websites and seminars to pass himself off as a self-help expert and a futures trading guru.

Turns out he had no credentials or success in either field, and his Mastery Group International was pretty much just masturbating investors with a wholly ineffective Sabaki-Micro Trading for Futures method.

Much as McCall's antics are pathetic, it's well worth noting the two-pronged nature of his fraud: money and personal well-being. The two are inextricably connected, and a good con works financial and emotional angles.

Numerous examples to follow . . . .

Fool's Gold Mission Statement: Tracking Securities and Currency Trading Fraud

The purpose of this blog is to report on legal and fraudulent securities and foreign currency trading trends that can have an effect--usually a bad one--on individual investors.

Over the last decade, e-commerce has changed the marketing landscape for foreign exchange or FOREX products and for securities, which typically include stocks, bonds, options, and mutual funds.

New vistas have appeared for harvesting the money of individuals. Some are simply misleading, like idiotic but fully disclosed efforts of low-level stock promoters. Others are clearly fraudulent, like stock price manipulation scams and Ponzi schemes. Still others are in a greyly lit Twilight Zone where the regulators haven't established rules clearly.

There are plenty of fraud blogs out there. Many of them simply call the reader's attention to one fraud in order to sell a different one. This blog does not sell anything or offer specific investment advice.

What it does do is offer critical and sanguine commentary on many of the legal marketing approaches and illegal scams directed at pretty much anyone with access to the internet, e-mail, newspapers or is just plain alive in our world.