Firms Charged With Fraud
Federal regulators on Tuesday charged two area firms with marketing illegal foreign currency futures to as many as 1,000 small investors.
“This kind of trading is very popular in Southern California, especially among ethnic communities,” said Louis Traeger, deputy regional counsel of the Los Angeles division of the U.S. Commodity Futures Trading Commission.
In one action, the CFTC charged Acro Information Service Inc. of Monterey Park and Pakco Holdings Ltd. of Carson City, Nev., with selling illegal futures to mainly Asian customers lured through advertisements in Chinese-, Korean- and Spanish-language newspapers.
Also named in the complaint were Acro’s former owner, Florentius Chan; his wife, Sandy Chan, who was the company’s former president; and Andrew Tai Wai, the current president of both Acro and Pakco.
Calls made to Acro on Tuesday were not returned.
In the second action, the CFTC charged Glendale-based Fintrex Inc. with offering illegal foreign currency futures contracts. The agency also charged the firm’s general manager, Arman Ovespyan, and senior broker, Lytresse Fox, with selling the contracts, which apparently were marketed mostly to the Russian community.
Calls to Fintrex were not returned.
Foreign currency futures allow investors to make leveraged bets on fluctuations in currency exchange rates.
But such futures trading can be very risky, regulators warn. The firms charged Tuesday were selling futures that did not trade on regulated exchanges.
Firms “often pitch this as a way to take advantage of the new global economy,” said Dan Nathan, deputy director of the division of enforcement for the CFTC in Washington. “They promise very high returns in trading whether or not the currencies go up or down.”
The agency recently issued a public advisory urging investors to look carefully at companies offering high returns from “low-risk” currency trading strategies.
In the last decade, there have been about 40 cases of similar scams, and six of those were in the last three months, pointing to a growing problem, especially in South Florida and Southern California, Nathan said.
It’s unclear how much money was involved in the recent cases or how much investors lost, Traeger said. Investors’ initial investments in the Acro case averaged $5,000 to $10,000.
In a lawsuit filed with the U.S. District Court for the Central District of California, the agency alleged that customers who responded to Acro’s and Fintrex’s advertisements were offered high-paying jobs trading the contracts. They were given limited amounts of training and then persuaded to open accounts to trade for themselves, the complaint said.
Like Acro, Fintrex also recruited customers through ads placed in newspapers, including The Times, regulators said.
Although the companies represented that traders could make large profits trading their own accounts, almost all of the customers identified so far by regulators ended up losing most or all of their money, the CFTC said.
In the Fintrex case, a preliminary injunction hearing is set for Aug. 24. In the Acro case, a hearing is set for Monday.
