WASHINGTON The federal agency that regulates currency futures trading is warning consumers about advertisements that promise big returns on investments in foreign currencies.
The Commodity Futures Trading Commission issued a consumer alert late this week regarding foreign currency scams, as it did in March 1998, when promoters played on peoples vague awareness of Asian economic turmoil and hunger for hefty returns to get them to invest.
The new warning comes at a time when people accustomed to high returns and disenchanted with the battered stock market may be looking for new places to invest their money.
"The public should always remember that if an investment opportunity sounds too good to be true, it probably is," the agency said in a news release. The commission also urged people to be skeptical of ads promising job opportunities as highly paid currency traders.
Even legitimate currency trading is risky, the agency noted.
Telemarketers in the scams often tout get-rich-quick investments in futures contracts on Japanese yen, German marks and other currencies in overseas markets. A futures contract obligates a trader to buy or sell a currency at a fixed price at a specific time in the future.
The foreign currency or exchange schemes are often called "forex" investments.
In many cases the schemes modeled after legitimate currency-market trading by financial institutions are a come-on, and none of the money handed over is actually invested, according to regulators. They say modest investors around the country have lost thousands of dollars, lured by a type of investment that is among the riskiest even when it is legitimate.
The Commodity Futures Trading Commission regulates retail trading of currency futures as well as trading on U.S. exchanges. In recent years it has brought enforcement actions against some people and companies that claimed customers could get huge profits at low risk from foreign currency trading.
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