This past week you saw two prior employees of a major international financial institution indicted for their alleged involvement in deceptive and fraudulent trading practices. The specifics of the charge concerned previously traded metals future contracts, according to Assistant Attorney General Brian Benczkowski from the Criminal Division of the Justice Department and the FBI’s New York Field Office Assistant Director in Charge William Sweeney.
This is only the latest in a long string of commodities fraud and Ponzi schemes that have been going on in the U.S. since the 1880s. It is a stark reminder to you of why it not only matters that you protect your retirement portfolio with gold, but that you do so wisely by acquiring physical bullion gold and silver. Gold offers insurance and protection during market turbulence. This is part of the ever-constant reminder of why you need the right gold in your retirement accounts. You need to learn what assets go in an IRA.
The Particulars of This Fraud Indictment
The case involves John Pacilio from Southport, Connecticut and Edward Bases from New Canaan, Connecticut. They have each received indictments for a single count of conspiracy for committing wire fraud that impacted the financial institution and another count of commodities fraud. Pacillo has also been hit with five separate counts of spoofing.
The pair were precious metals traders in a prestigious international bank office in New York City. They took part allegedly in schemes running for multiple years to mislead the precious metals futures market which traded over the COMEX Commodity Exchange Inc., according to this indictment. It is the Chicago Mercantile Exchange Group that owns and operates the COMEX.
The fraudsters and their colleagues have been charged with defrauding participants in the commodities’ markets through entering orders that they never meant to execute. They did this in an effort to create what appeared to be a large amount of both demand and supply. The goal was to trick other market traders into trading these resting order prices and quantities in times that they would not have placed trades otherwise.
Keep in mind that these are charges and indictments, which are still allegations. They two have not been proven guilty in court yet. Yet the writing is on the wall for the pair and their co-conspirators. Clearly the evidence is sufficient to make the case that they cheated the paper-based precious metals markets. Whether they will go to jail for it or not remains to be seen.
Commodity Fraud Dates Back to Over 125 Years
Commodity fraud is nothing new unfortunately. It has its roots back in the “bucket shops” of 1880s America. These shops were establishments that permitted speculation on the then-current commodities prices. The speculations were not entered as contracts on any of the commodities exchanges.
Instead they simply went on the books of the bucket shops, much like you would see in a gambling scenario at a bookie. Unfortunately for those who were taken in, the winning sides had to be paid out by the bucket shop resources. These turned out to be woefully inadequate to deliver the promised returns when an investor was successful and then arrived to pick up his gains.
Modern regulation of the commodities markets (in an effort to stop fraud as we know it today) began with the formation of the CFTC in the 1974 action of the U.S. Congress. The CFTC opened its first case for fraud in commodities contracts against the AITC American International Trading Company.
This Los Angeles-headquartered firm began providing managed accounts to trade futures contracts on commodities by requiring an initial investment of minimally $2,000. They guaranteed that investors could not lose more than their initial investment and promised speculators that they would earn profits on their investment.
Commodities Fraud Becomes Easier With the Integration of Global Capital Markets
Per the FBI, fraud is only getting worse in financial and commodity markets. This is because the ongoing integration of worldwide capital markets has given devious fraudsters the previously unavailable chances to prey on unsuspecting American investors and businesses who are looking to diversify their portfolios. A greater percentage of Americans have also decided they will invest their money in the commodities markets than ever before too.
The growth of these markets has made it all too easy for fraud to occur in such fast moving markets. The nature of the paper-based precious metals markets, their highly complicated investment vehicles, and the larger sums of money in play only give more room for commodity fraudsters to practice their cheating investment schemes.
What Different Types of Commodities Fraud Should You Be On Guard Against?
There are several different kinds of commodities fraud against which you need to be guard these days. The strict definition of commodities fraud is the reported or illegal sale of semi-finished goods or raw materials that exchanges sell (such as gold, silver, grain, coffee, and pork bellies). The fraudsters who engage in these activities trick investors by making untrue claims that they pair up with extreme pressure sales techniques.
Generally with such fraud cases, the fraudsters will produce account statements that are bogus yet that show supposed commodities investments. In reality, these particular investments actually do not exist. Rather the criminals have siphoned off the money for their own gain.
Besides this, they could practice what is known in the trading business as “churning.” This refers to excessively trading to create commissions for their own benefit. Two of the most common forms of fraud in commodities cover investments into precious metals (such as gold and silver) and into the foreign currency markets (Forex).
How Technology Is Making Commodities Fraud More Dangerous and Harder to Prevent
The problem for you as an investor is to be able to distinguish between what are real precious metals commodity investments and which ones are fake. Avoiding scams is crucial. The FBI has warned that the ripoff artists are growing increasingly sophisticated in their fraudulent schemes.
In a number of different cases, the fraudsters will move around their operations on a continuous basis. This helps them to avoid the jurisdiction of the Commodities and Futures Trading Commission (CFTC) by arguing that they were simply working with foreign-based regulated counter-parties.
Others will insist that the contracts which they sold were actually spot trading positions rather than futures contracts in an effort to escape the justice of the CFTC. One thing that has really transformed the capabilities of the commodities con men is the widespread availability of technology that has become more and more sophisticated in recent years. This technology has changed the structure and face of the commodities’ sector while vastly increasing the chances to commit fraud on unwitting investor suspects.
Investing in Physical Bullion Gold and Silver Is Key For Your Portfolio
The key to protect your investments in the precious metals is simply to avoid altogether the venue of the fraudsters and con men. They are able to affect account statements of paper-traded gold and silver contracts and accounts. They can not practice fraud on you if you insist on only purchasing tangible gold and silver ounces and assets. You just need to be sure that you are ordering your physical precious metals treasure-trove from a reputable dealer who includes any relevant paper work or certifications that are available with your purchase.
This explains why you need to establish a Regal gold IRA so that you can hold physical precious metals in your retirement portfolio. You can not do that in a traditional form of IRA. Now is the time for you to look into the Gold IRA rollover rules and regulations so that you can get started. You can find the best selections of gold for this type of investment with a little well-spent effort.