SEC Nails MN-Based Currency Trading Fraud

The SEC nailed a Minnesota-based currency fraud today, a bust that I believe will be the opening salvo in a much bigger battle to protect Americans from this burgeoning area of fraud.

SEC Obtains Asset Freeze in Minnesota-Based Foreign Currency Trading Scheme

FOR IMMEDIATE RELEASE
2009-253

Washington, D.C., Nov. 24, 2009 — The Securities and Exchange Commission has obtained an emergency court order freezing the assets of a self-proclaimed Minneapolis-based money manager, a nationally syndicated radio personality and four companies they controlled in a foreign currency trading scheme that raised at least $190 million from more than 1,000 investors.

The SEC alleges that Trevor G. Cook and Patrick J. “Pat” Kiley sold unregistered investments through shell companies by misrepresenting that they would deposit each investor’s funds into a separate account in the investor’s name to trade in foreign currencies and generate annual returns of 10 percent to 12 percent. They also misrepresented that their foreign currency trading program involved little or no risk and that investors’ principal would be safe and could be withdrawn at any time. Kiley pitched the investments on his financially themed “Follow the Money” show that he hosted on radio stations nationwide.

As I mentioned in my piece “3 Potential Bubbles for Retail Investors“, currency and forex trading has historically been only lightly regulated in terms of sales practices.  As a result, many fraudsters from other industries have jumped on the bandwagon. 

There is a ton of leverage employed in even the most common strategies and with daily headlines trumpeting the weak dollar, individuals are being led like sheep to the slaughter into this arena.

I applaud the SEC for shutting down this ponzi scheme and I hope everyone reads the full press release before sending money to someone who represents currency speculation as “riskless”.

Source:

SEC Obtains Asset Freeze Against MN Currency Scheme (SEC.Gov)

Read Also:

3 Potential Bubbles for Retail Investors (TRB)

What's been said:

Discussions found on the web
  1. Dennis Yanez commented on Nov 25

    The problem for retail traders is not so much forex trading itself as the level of leverage/gearing available to neophyte traders. Many of the more popular trading platforms offer 200:1! leverage as their default level.

    I have traded on an excellent platform with a 50:1 max, 30:1, 20:1, 10:1 and 1:1 available as well with 20:1 the default level. Given the lower daily volatility and more importantly range volatility well below the average vol’s for popular individual common stocks, it is not quite the lose/lose situation many portray it to be.

    TRB: Good point, but I’m even more concerned with the sales practices used to rope in the individuals, some of whom have no business trading currencies at all, into schemes like the one above. disgusting. Thx for reading.

  2. Dennis Yanez commented on Nov 25

    The problem for retail traders is not so much forex trading itself as the level of leverage/gearing available to neophyte traders. Many of the more popular trading platforms offer 200:1! leverage as their default level.

    I have traded on an excellent platform with a 50:1 max, 30:1, 20:1, 10:1 and 1:1 available as well with 20:1 the default level. Given the lower daily volatility and more importantly range volatility well below the average vol’s for popular individual common stocks, it is not quite the lose/lose situation many portray it to be.

    TRB: Good point, but I’m even more concerned with the sales practices used to rope in the individuals, some of whom have no business trading currencies at all, into schemes like the one above. disgusting. Thx for reading.

  3. Anal_yst commented on Nov 25

    The scamsters are getting more intelligent; instead of promising ridiculous 20, 30%+ returns they’ve made them good enough that people want in NOW but low enough to be believable.

    TRB: this will get worse before it gets better

  4. Anal_yst commented on Nov 25

    The scamsters are getting more intelligent; instead of promising ridiculous 20, 30%+ returns they’ve made them good enough that people want in NOW but low enough to be believable.

    TRB: this will get worse before it gets better