The CFTC alleges that investors were offered a return of 10% on their money within 30 days. CRE was supposedly going to achieve this by trading dollars against yen. However, according to the CFTC, CRE had lost $4.4 million since June 18 2008. The company made up the shortfall by creating a Ponzi scheme, with fictitious profits funded by subsequent pool participants.
“Investors must run the other way when approached by anyone claiming to guarantee exorbitant monthly returns, like those promised by CRE and Ossie. Such representations should raise an immediate red flag that such investment is too good to be true,” says CFTC acting director of enforcement Stephen Obie.
The CFTC’s investigation continues.
It is not clear whether the economic climate is leading to an increase in such schemes, or if they are being discovered as a result of it. But the CFTC says it is uncovering a greater number of scams. “We are seeing an uptick in Ponzi scheme cases because, in this economic climate, new investors cannot be found to perpetuate the scheme,” says Obie. “As these schemes collapse, the CFTC will move swiftly to prosecute those who harm innocent investors.” The action against Ossie and CRE is the first case brought by the CFTC’s Forex Enforcement Task Force under new powers granted by the Food, Conservation, and Energy Act of 2008.
Separately, the CFTC announced that a New York court had imposed a $240,000 fine and trading and registration bans on Boris Shuster, of Fort Dix, New Jersey, for operating an illegal FX boiler room operation and violating the anti-fraud provisions of the Commodity Exchange Act.
Judge Leo Glasser granted the CFTC’s motion for summary judgment against Shuster but noted that although Shuster’s acts merited a greater penalty, he was also subject to a $310,000 criminal judgment restitution obligation entered in a parallel criminal proceeding. The CFTC originally filed the complaint in October 2003, alleging that Shuster and others had fraudulently solicited more than 300 customers to trade illegal off-exchange FX contracts. The court’s order specifically found that from at least December 2000 to at least July 2001, Shuster used a sales force to make fraudulent and misleading representations regarding his profitability and the safety of the contracts he was trading. He also issued false statements to customers, and then told them that catastrophic trading losses had wiped out their funds.
