For Release: June 19, 2001
CFTC CHARGES FLORIDA COMMODITY FIRM WITH FRAUD
CFTC Alleges That First Investors Group of the Palm Beaches Used Fraudulent Infomercial and Sales Pitches To Solicit Customers
WASHINGTON – The Commodity Futures Trading Commission (CFTC) announced today the filing of a two-count administrative complaint against First Investors Group of the Palm Beaches Inc. (First Investors Group), a registered Introducing Broker, of Delray Beach, Florida, and its two principals, William S. Cordo (Cordo) of Delray Beach, and Mitchell S. Davis (Davis) of Boynton Beach, Florida. The CFTC charges that First Investors Group, at the direction of Cordo and Davis, fraudulently solicited customers to invest in options on commodity futures contracts.
Specifically, the CFTC complaint alleges that, from approximately June 1998 to February 2000, First Investors Group, at the direction of Cordo and Davis, fraudulently solicited customers to open accounts with the firm to trade options, through telephone sales solicitations and the broadcast of a thirty-minute television infomercial. According to the complaint, First Investors Group defrauded customers by making false claims about, and failing to disclose material facts concerning, the likelihood of profiting from and the risk of loss involved in trading commodity options. For example, as alleged, First Investors Group knowingly made false claims that investors could profitably trade options by exploiting predictable seasonal changes and other existing and known supply and demand forces in the cash markets for various commodities, such as unleaded gasoline.
In sharp contrast to the fraudulent claims of great profitability and minimal risks in trading options, the complaint alleges that nearly 97% of First Investors Group customers who closed accounts over a two-year period lost all or virtually all of the funds they invested, and those customers had losses totaling almost $7.5 million and paid approximately $3.7 million in commissions. As further alleged, FIG never disclosed the losing trading record of its customers.
The complaint alleges that such conduct violates section 4c(b) of the Commodity Exchange Act and Commission regulations 33.3 and 33.10. The complaint also alleges that First Investors Group, Cordo, and Davis failed to supervise diligently the solicitation and handling of customer accounts, in violation of Regulation 166.3, and that Cordo and Davis aided and abetted the alleged violations.
A public hearing has been ordered to determine whether the allegations are true and, if so, what sanctions are appropriate and in the public interest. Possible sanctions include cease and desist orders, restitution to defrauded customers, civil monetary penalties, trading prohibitions and registration revocations, suspensions or restrictions.
Notes to Editor: Earlier this month on June 6, 2001, the CFTC filed an administrative action against another Introducing Broker, Madison Financial Group LLC, located in Los Angeles, California, and its principals, Richard Cohen and Ronald Scott, also charging them with fraudulently soliciting customers with false claims of profits and minimal risks from trading options. ( See CFTC News Release 4523-01, June 6, 2001.)
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