CFTC New Release 4451-00 (SACV-00-940)
For Release September 27, 2000
CFTC FILES ENFORCEMENT ACTION ALLEGING THE FRAUDULENT PROMOTION OF COMMODITY TRADING METHODOLOGY OVER THE INTERNET
CFTC Alleges that Rabb Sabin and Art Smith, Both of California, Fraudulently Misrepresented the Profitability and Performance of Their Internet Website’s Trading Methodology and Their Backgrounds and Trading Histories
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a two-count civil injunctive complaint on September 26, 2000, in the United States District Court for the Central District of California against Rabb Sabin of Silverado Canyon, California,and Art Smith of Orange, California, who operate under the name of Westar Financial Services. The CFTC complaint alleges, among other things, that Sabin and Smith committed sales solicitation fraud in connection with advertising their commodity options trading methodology on their internet website, The Cash Nursery (TCN), http://www.the-cash-nursery.com.
Specifically, the CFTC complaint alleges that from 1996 through the present, the defendants fraudulently solicited members of the public to purchase subscriptions to their internet website on which they tout a trading methodology for trading commodity options. On their website, the defendants consistently misrepresented the performance and profitability of their trading methodology and fraudulently presented hypothetical trading results as actual trading results, the CFTC alleges. Further, they allegedly misrepresented their backgrounds and trading histories.
For example, the CFTC complaint alleges that the defendants informed customers that TCN actually placed "successful" trades for commodity options through certain brokers, despite knowing that TCN never had any commodity trading account. The complaint also alleges that Smith informed customers that he "[t]urned $1,000 into $200,000 in one year using TCN methods" when, in fact, this was not actual trading but was, at best, hypothetical, paper trading. By such acts, the CFTC complaint alleges that the defendants violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and Commission regulations. The complaint also alleges that the defendants violated Commission regulations by failing to include the required cautionary statement about the limitations of hypothetical trading in their advertising or in their track record promotional materials.
In its continuing litigation, the CFTC is seeking preliminary and permanent injunctive relief, an accounting of Sabin’s and Smith’s assets and liabilities and of funds received from subscribers, disgorgement of all ill-gotten gains, restitution to subscribers, and civil monetary penalties of up to $110,000 or triple the monetary gain for each violation of the CEA.
CFTC Action Is Part of Law Enforcement Initiative To Clean-Up Internet Websites That Fraudulently Market Commodity Trading Systems
The CFTC’s action against Sabin and Smith is part of an on-going law enforcement initiative by the CFTC aimed at the fraudulent promotion of commodity trading systems or advisory services using Internet websites. On May 1, 2000 and on September 7, 2000, the CFTC filed a total of 15 enforcement actions against promoters of such systems who were using the Internet to market their systems by, among other things, making fraudulent claims concerning the extraordinary profits to be realized using their systems to trade commodity futures or options (see CFTC News Releases 4442-00, September 7, 2000, and 4397-00, May 1, 2000, respectively).
The CFTC also issued a CFTC Consumer Advisory warning the public about false and misleading claims on Internet websites touting outstanding performance with little risk if a customer used the advertised trading systems or advisory services.
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