FTS Financial: A ‘Real Time Trade Room’ With No Real Trades
In the FTS Financial real time trade room case, the court ordered the company to pay $2.4 million to clients and a separate $2.4 million civil penalty for promoting simulated futures trading as live. The orders found that customers were promised a professional trading with real money at risk. According to the Commodity Futures Trading Commission’s announcement of the consent orders, no futures contracts were ever traded in the room.
FTS Financial, Inc., based in Irvine, California, sold access to an online futures forum. The commission brought the civil fraud action, and the federal court in the Southern District of New York entered the consent orders announced in December 2017. The case reaches into work an insider would recognize: the sales calls, the performance materials and the claim that the trader on the screen was risking real money.
Live Futures Trading Was the Product
According to the commission’s September 2016 complaint announcement, FTS sold the experience of watching a professional trade, from entering an order to seeing it filled and then watching it win or lose. The complaint alleged that the company’s website and the trader’s emails reinforced the claim that customers were watching actual trading as it happened. The trader’s own promotional material described that sequence of orders, fills and results.
The later consent orders found that the trading was entirely hypothetical or simulated. We see the absurdity in the orders’ findings: customers paid to witness a professional’s decisions with money on the line, in a room where he never placed a real futures trade.
A Track Record Built From Simulated Trades
The FTS consent order found that the company promoted supposed profits which, if annualized, represented a return of more than 400%. The trader’s separate order found that he created a false and misleading performance record knowing it would be used to solicit clients. The complaint alleged that FTS used that track record to sell access to the same room that supposedly produced it.
According to the commission’s account of the trader’s order, his promotional material called him a “master trader” and “incredibly successful.” The order found that his limited experience trading futures for himself had been unsuccessful. The advertised expertise and the advertised returns supported each other, while neither matched the trading history described in the orders. The FTS order also found that the company supplied supposed past-performance information without prominently displaying the required disclosure about the limitations of hypothetical or simulated results immediately beside it.
Cold Calls and the Broker Assist Program
The commission’s complaint alleged that FTS made between 700 and 1,000 cold calls a day to prospective customers around the country. It alleged that FTS charged a one-time fee of $4,995 to $7,500 for six months of access and took in more than $2.5 million through the fraudulent promotion. That alleged revenue exceeded the amount the court later ordered returned to clients. The complaint traced the money to selling room access, while the orders found that the trading success used to sell it was simulated.
The trader also solicited clients for a Broker Assist Program, according to the complaint. He described it as a way for him to direct trading in customers’ own futures accounts. The later order against him found that he solicited managed accounts without the required registration as an associated person of a commodity trading advisor.
The managed-account offer described in the complaint asked customers to trust that same trading expertise with their own accounts. For an insider, the relevant question is who sold the advice, who could direct the account and who handled the trading money.
The Same Promise in Crypto Trading
Coin Drop Markets shows another version of selling access to supposed trading expertise. In that case, the commission’s complaint alleged that customers paid subscriptions for real-time advice that never arrived. The complaint described the missing service:
In fact, however, after receiving subscription payments from multiple CDM Customers, Defendants never provided to such customers continuous, real-time trading signals, advice, or trading expertise through its social media chatrooms, through online communications such as via Twitter, or through its website.
The parallel is the paid promise of access to a trader’s expertise. The FTS consent orders found a particular deception inside that promise: the purported live trades were simulations. In both cases, what customers were told they would receive is central to understanding the money they paid.
What Evidence Is Required to Prove Fraud?
Evidence of trading-room fraud connects what customers were promised with what the accounts actually show. We work with you to establish that connection and explain how the claimed trading results became a sales pitch. A room recording or timestamp, compared with brokerage statements and trade confirmations, can help test whether a displayed trade reached an actual account. Performance sheets and sales scripts can explain how those supposed results became a reason to pay for access.
The Commodity Futures Trading Commission described its use of trade-data analysis to identify activity warranting investigation in its fiscal year 2021 budget justification, published in 2020. An insider can add the business explanation to that comparison: which account the demonstration supposedly used, who prepared the results and what salespeople were told to say. We examine those connections with the person who understands the operation.
The managed-account pitch adds another set of questions for that conversation. Account-opening material and instructions about who could direct trades may connect the room’s sales story to the customer’s brokerage account. If you handled the subscriptions, calls, performance claims or account instructions, your knowledge may explain how the same trading reputation was used to sell different services.
Can I Get Paid for Being a Whistleblower?
The CFTC whistleblower program can pay an award of 10% to 30% of the sanctions collected in a qualifying action. We assess how your knowledge of the sales operation or trading records could contribute to a CFTC action and a reward. The False Claims Act is a separate program. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.
You Know What Was Behind the Screen
If you know how a trading room’s sales claims were made or what its accounts actually showed, speak to one of our Whistleblower Experts about what the room really traded. We build the case with you and bring in CFTC whistleblower lawyers who understand false performance claims and managed futures accounts. We stay with you as we turn what you know about the room into your strongest CFTC whistleblower case.
