Here is another case brought against a purported “commodities trader” based in Utah. According to the story, commodities trader Keith H. Debus “met the woman at a religious conference and misrepresented himself as a successful licensed manager of a high-yield fund that specialized in commodities trading.” Unfortunately for her, when she asked for the money back he told her it was gone.
Trading commodities (like foreign currencies or FOREX trading) is complicated, volatile and requires a high level of expertise. I have heard of stories of people who have lost substantial sums in a very short period of time in these markets. Even experts will tell you that trading commodities is highly risky.
Because of the speed, risk and volatile nature of this market I have seen a number of individuals who claim to have a “foolproof system” for commodities trading, typically using proprietary algorithms and automated trade execution. They will usually agree to (1) license the system to you for a large fee, or (2) trade the system on your behalf with your money (which is “pooled” with other investors’ money) in a commodities pool.
Surprisingly, the CFTC does not require some commodities pool operators to register, including operators of small pools with 15 or fewer investors whose total trading capital equals $400,000 or less, or pool operators who receive no compensation.
However, these small pool operators ARE required to notify investors, the CFTC, and NFA that they are operating without registration. But regardless of whether they are registered or not, commodity trading is highly risky and there are many frauds and Ponzi schemes out there. If you are approached, here are some ways to protect yourself:
- Ask to see the pool’s disclosure documents and performance history.
- Ask the pool operator to give you account statements that the pool receives from the registered firms through which the pool trades.
- Ask about all fees and commissions charged by the pool operator. Compare these fees and commissions to those of registered pool operators.
My advice? Always use a licensed broker, and verify that they are in fact registered. If you are a victim of a commodities or foreign currency trading scam you should file a complaint with the CFTC, and hire an aggressive attorney.
© 2010 Mark W. Pugsley, all rights reserved.