The Federal Trade Commission has settled a complaint against a set of California-based defendants whose telemarketers and promotional brochures allegedly misled hundreds of consumers about their ability to make big money by speculating on foreign currency prices. The Commission also charged the defendants with making a variety of other misrepresentations, including how and when investors could access their money, and that the defendants would not make money unless the investors did. The stipulated court order settling the FTC’s complaint bars the defendant from making any of the false claims put forward in their telemarketing and written promotional pitches.
The stipulated order announced today settles the Commission’s charges against the following defendants: Michael Zelener, individually and as an officer or director of corporate defendants Amgine Corp., a Nevada corporation doing business as (dba) British Capital Group (BCG); and Markham & Co., a Nevada corporation dba British Capital Group Ltd. Neither of the corporate defendants are currently in business, having been shut down as a result of a lawsuit filed by the Commodities Futures Trading Commission (CFTC) in June 2003.
According to the FTC, BCG used telemarketing boiler-rooms staffed by associates Zelener hired to cold-call potential investors. Investors were solicited to open trading accounts at AlaronFX (AFX), a subsidiary of a large currency trading company in Chicago, that is not named in the Commission action. BCG’s telemarketers allegedly told consumers that they could make money by speculating on the movement of foreign currency prices, so-called “forex” transactions, in which foreign currency contracts are traded over-the-counter. However, most of the customers BCG’s telemarketers called were unsophisticated investors who were not familiar with forex transactions. Also, they were retail investors, unlike most forex investors who trade in foreign currencies to balance the risks associated with their other investments or to cover other foreign currency trades.
During the solicitations, the FTC’s complaint states, the defendants’ telemarketers made a range of misrepresentations, as detailed below. The Commission also alleges that once the telemarketers identified consumers who were interested in BCG’s solicitations, Zelener sent the potential investors information packages that also contained misinformation, including statements such as: “[Accounts] professionally managed 24 hours a day” and “traders and analysts professionally supervise the . . . account program on a 24 hour basis.” The promotional materials also falsely stated that investors would receive monthly statements showing profits and losses, and that accounts “have a high degree of liquidity,” with funds “available to the client on 48 hours notice.” Finally, the FTC alleges that while BCG told investors it would make no money unless they did, the company was paid by AFX for every trade it solicited – for a total of $1.4 million, while at the same time its customers lost more than $1.46 million.
The Commission’s complaint contains two counts. The first alleges that the defendants made seven misrepresentations, each of which violated the FTC Act. The second alleges that five of these misrepresentations also violated the FTC’s Telemarketing Sales Rule (TSR). The seven alleged misrepresentations include the following: 1) that investors would make at least 10 percent profit per month; 2) that only 20 percent of the investor’s equity would be used for trading; 3) that investors would be notified if their accounts fell below a certain percentage equity; 4) that investors would have 24-hour access to their accounts; 5) that investors would receive monthly statements; 6) that investors could recover their balances quickly; and 7) that the defendants would not make money unless the investors made money.
The consent order announced today bars the defendants from making any of the misrepresentations alleged in the FTC’s complaint, and more generally from violating the FTC Act or the TSR in the future. It also contains specific reporting and compliance requirements that will allow the Commission ensure the defendants meet the conditions of the order.
The Commission vote to approve the complaint and consent order was 5-0. The FTC filed the complaint and consent in the U.S. District Court for the Northern District of Illinois, Eastern Division, on May 9, 2005, and was entered by the court on May 10, 2005. The FTC gratefully acknowledges the support of the CFTC in investigating this matter.
NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the complaint and stipulated final order are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for
the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(FTC File No. 042-3018)