In October of 2017, the Commodities Trading Futures Commission (CFTC) settled a case brought against FTS Financial, Inc. and its proprietors after finding their brazen misrepresentation of a “Real Time Trade Room” in order to fraudulently obtain over $2.5 million in customer funding. FTS Financial, a California-based company specializing in commodities trade advisory, settled the complaint and subsequently paid $2.4 million to the CFTC and an additional $2.4 million to restitute the engorged funds.
The complaint, filed in 2016, stated that FTS Financial falsified a multitude of documents, statements, and promotion materials to solicit investments. The cardinal offense involved their marketing of a “Real Time Trade Room,” an online forum which would purportedly allow for paying customers to watch the lead advisor make “live” trades, thus allowing for them to mimic the same trade in their own account dependent on its return. In their advertising campaign for the Room, FTS claimed that “you’ll actually see him physically enter the trade order […] you’ll see that order get filled and then you’ll see the order either go on to be a winner or to be a loser.”
Though a brilliant concept, its terminal flaw lay in the complete nonexistence of such trades. Not only was the Room not recorded in real-time, as the name alleged, but all futures trading that transpired within it were mere simulations and therefore, inaccurate representations of the current market. The ploy cost misled customers between $4,995 to $7,500 each for a six-month membership, which granted them access to these assumed “live trades.” Due to their wildly efficient cold-calling techniques, FTS Financial was able to persuade thousands of customers and consequently swindle $2.5 million in funding for the service in just over a year.
The virtual nature of these “trades” is not inherently illegal under CFTC standards; however, FTS failed to provide clients with the mandated disclosures that would outline the limitations of such hypothetical transactions. The complaint argues that the omission of such relevant information evidenced that FTS both directly violated the Commission’s regulations and did not act in good faith, together indicating that the scheme was executed with fraudulent intent.
Though the conception and promotion of the Room was duplicitous by itself, CFTC reported that the advisors at FTS further claimed to have long-standing expertise in commodities futures trading, creating the illusion of trust to sway potential clients. These claims were found to have been fabricated as well, as the Room’s primary operator did not perform any legitimate trades inside of the forum. In actuality, his only experience involved a short stint of personal trading in the 1970’s, of which no transactions were found to have been profitable.
FTS Financial’s multiple falsifications may have landed the company in hot water with the CFTC, but in the Consent Orders signed during the settlement agreement, they were absolved of any liability in the matter. Still, they were required to relinquish any further ability to trade or operate as facilitators for future commodity trading, in any capacity. In addition to the collective $4.8 million the company was ordered to recompense, each of the proprietors will together pay $280,000 to further reimburse the victims of their scheme.
Whistleblower Justice Network Can Help You
Whistleblower Justice Network partners with whistleblowers in an attempt to expose financial fraud schemes that directly violate the regulations of the U.S. Commodity Futures Trading Commission. Utilizing the CFTC’s Whistleblower Program, we work together with whistleblowers to bring forth a powerful and compelling case whilst ensuring the anonymity and protection of our clients. Together, we aim to bring to justice those who employ deceitful tactics in the pursuit of personal gain.
If you have meaningful information about commodity futures trading that you believe is in violation of the CFTC, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.