CFTC News Release 4416-00
For Release July 5, 2000
CFTC ISSUES CONSUMER ADVISORY ALERTING PUBLIC TO BE WARY OF CLAIMS OF EASY PROFIT AND LOW RISK FROM BUYING PRECIOUS METALS AND OTHER COMMODITIES
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it issued a Consumer Advisory warning the public to be wary of companies that sell investments in precious metals -- such as gold and other commodities -- based on sales pitches claiming that customers can make a lot of money, with little risk, by purchasing metal through a financing agreement. These companies may be offering opportunities to speculate on the price movement of precious metals or other commodities without actually taking delivery of the commodity.
The CFTC issued this Advisory after filing a number of enforcement actions over the past several years against companies suspected of illegally or fraudulently selling precious metals commodity futures contracts or options.
Phyllis Cela, Acting Director of the CFTC’s Division of Enforcement, commented:
This advisory is another step in the CFTC’s on-going program to educate the public about fraudulent "get rich quick" telemarketing schemes involving commodity futures contracts and options. Here, we are warning the public to look closely at companies touting great profits and little risks in investments involving precious metals and other commodities, particularly where the companies pretend to provide or arrange financing and claim to be storing commodities on the customer’s behalf. As our recent enforcement actions reveal, such claims of great profit and low risk are often false.
The Advisory specifically warns that companies -- soliciting through radio, television and internet advertisements, informercials, and telephone "cold calls" -- often promise quick riches with low risk, ask customers to pay only a small percentage of the total purchase price, claim that they (or another company) will purchase and store the metal, and pretend to arrange financing for the customer supposedly to allow the customers to obtain a larger profit by controlling a larger amount of metal with their relatively small downpayment. Often such companies will claim to be dealing with foreign storage or banking entities and will charge phony storage and interest fees.
The Advisory provides a list of common false claims made or typical phony fees charged by such companies and other warning signs of commodity "come-ons." The Advisory also identifies sources of information concerning companies and sales persons, general information about trading commodity futures contracts and options on commodity futures contracts and other consumer advisorys issued by the CFTC. As the Advisory cautions, if in doubt, don’t invest.
The CFTC also announced today that (1) on June 28, 2000, it filed an enforcement action and obtained emergency relief against National Bullion and Coin, Inc. (NBC), and others, alleging a fraudulent nationwide telemarketing scheme to solicit customers to purchase illegal precious metals futures contracts (see CFTC News Release 4415-00, July 5, 2000) and (2) on June 20, 2000, in another CFTC enforcement action alleging an $18 million precious metals commodity fraud, a federal district court for the Western District of North Carolina issued a preliminary injunction against defendants IBS, Inc.; IMC Trading, Inc.; Joe Miller Company d/b/a IMC Trading; Mazuma Trading Group, Inc. d/b/a Pinpoint Marketing, Ltd.; Alan Stein; Joseph Finateri; and Michael Temple, barring them from soliciting customers or accepting funds for commodities trading (see CFTC News Release 4417-00, July 5, 2000).