American Commodities Group Scam

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American Commodities Group Scam

American Commodities Group Scam Widens

Italy’s CONSOB continues to target unregulated brokers and investment scams. The regulator recently added two names to its blacklist, UP4X and the American Commodities Group, ACG. Both are operating illegally in Italy, neither having been registered or regulated. UP4X is a forex broker, ACG is an “investment” adviser soliciting to and trading for Italian citizens. ACG at least has been in the spotlight before, earning itself a similar blacklisting from Saskatchewan regulator FCAA (Financial And Consumer Affairs Authority). CONSOB is taking severe action and may block the websites from Italian Internet servers to prevent further fraud. ACG is operated by a man named Spencer George who is also not registered or regulated and likely a black hat marketer. An independent organization operating the website AmericanCommoditiesGroup.com is also actively alerting the public to frauds perpetrated by both ACG and Mr. George.

FinanceMagnates Interviews BCSC Official

FinanceMagnates recently interviewed the Director of Enforcement for the British Columbia Securities Commission. The BCSC is one of the leading anti-binary options voices in Canada and at the forefront of an effort to ban binary trading outright. The take-away from the article is that any binary options websites are out for nothing more than to steal your money. Well duh! Like we didn’t already know that. Binary options is plagued by financial marketing scams but that doesn’t make binary options bad. The problem now isn’t so much that fraud exists but that there are not enough regulated outlets for us traders forcing many of us to seek out unregulated and often untrustworthy avenues for trading.

When pushed on the subject whether Canada would ever give a binary options broker a license Mr. Muir said “No person is authorized to trade binary options in any Canadian jurisdiction. Any application to be registered to sell binary options would be decided on a case-by-case basis. . . Many websites claiming to offer binary options are simply vehicles for fraud. These fraudsters have no interest in registration or compliance with securities law, because they are not conducting any real business. They are just out to steal money.” Yeah, but, what about the ones that are trying to operate legit?

Serious Fraud Office investigates Glencore over suspected bribery

The £30bn company, which is the world’s largest commodity trader, says it will cooperate

Glencore’s share price fell in the wake of the investigation into the firm with headquarters in Baar, Switzerland. Photograph: Urs Flueeler/AP

The UK’s Serious Fraud Office has launched an investigation into suspicions of bribery at mining and commodity trading group Glencore.

The SFO said “it is investigating suspicions of bribery in the conduct of business by the Glencore group of companies, its officials, employees, agents and associated persons”.

In a statement, the £30bn company added: “Glencore has been notified today that the Serious Fraud Office has opened an investigation into suspicions of bribery in the conduct of business of the Glencore group.”

Glencore, which is listed on the London stock exchange but has its headquarters in Baar, Switzerland, said it would cooperate with the investigation.

Its share price fell by 9% on the news to close at 216.9p, a three-year low. The company is the world’s biggest commodity trader, buying and selling everything from oil to cotton, wheat and sugar. It operates in more than 50 countries and also has a significant mining operation for gold, silver, platinum, nickel, iron and aluminium.

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The announcement of the SFO probe is the latest setback for Glencore, which is already being investigated by the US Department of Justice for alleged money laundering and corruption in Nigeria, Venezuela and the Democratic Republic of Congo (DRC), Africa’s biggest copper producer, dating back to 2007.

The announcement of a UK enquiry had been widely expected in mining circles, following a Bloomberg report in May that stated that the SFO was preparing to open a formal bribery investigation into Glencore and its work with Israeli billionaire Dan Gertler and the leader of DRC.

Gertler’s notoriety in the DRC, which is rich in resources but riven by conflict, spans nearly two decades. He is reported to have made billions from being the unofficial gatekeeper to natural resources deals in the central African country. His friendship with the nation’s former president Joseph Kabila – who was head of state from 2001 until earlier this year – has long been a source of controversy.

Gertler was cited by a 2001 UN investigation that said he had given Kabila $20m to buy weapons to equip his army against rebel groups in exchange for a monopoly on the country’s diamonds.

The Israeli was also named in a 2020 Africa Progress Panel report that said a string of mining deals struck by companies linked to him had deprived the country of more than $1.3bn in potential revenue.

In 2020, leaked documents that formed part of the Panama Papers investigation showed how Glencore had secretly loaned tens of millions of dollars to Gertler after it enlisted him to secure a controversial mining agreement in the DRC.

The tycoon has repeatedly stated that all allegations of illegal behaviour are “false and without any basis whatsoever”, that he “rejects them absolutely”, and that he transacts business “fairly and honestly, and strictly according to the law”.

Glencore has also developed a controversial reputation of its own.

The company was founded in 1974 by the commodities trader and financier Marc Rich, who in 1983 was indicted on charges described by the then US attorney for New York, Rudolph Giuliani, as “the biggest tax evasion case in United States history”.

He was also charged with buying millions of barrels of oil from Iran during the 1979-81 hostage crisis, flouting a ban on “trading with the enemy”. He fled to Switzerland and remained on the FBI’s most-wanted list until he was controversially pardoned by Bill Clinton in the final hours of his presidency in 2001.

By then, Rich had long lost control of the company following a management buyout in 1993.

Under its billionaire chief executive, Ivan Glasenberg, the company grew to become the world’s biggest commodity trader, supplying the raw materials used in products from cars to smartphones.

When it floated on the London stock exchange in May 2020 it was valued at £38bn but the shares, which were then priced at 530p each, have never been worth as much since.

Many of Glencore’s executives have left in the past year. This week, Glasenberg hinted that he could leave the company soon.

Commodities fraud

Commodities fraud, any illegal attempt to obtain money in connection with a contract for the future delivery of assets, which ultimately are never exchanged. Commodities fraud typically involves assets traded on organized exchanges such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Futures Exchange, the MidAmerica Commodity Exchange, and the Kansas City Board of Trade. Commodities fraud pertains to exchange members who fail to register with the exchange, who perform transactions with no economic purpose other than to generate profit for the member of the exchange, who provide false or misleading information to customers, or who steal customer funds.

Futures contracts are legally enforceable contracts, or agreements, where one party agrees to pay a certain price for a specified commodity to be delivered on a specified date. The asset may be a certain quantity of corn, soybeans, wheat, oil, petroleum, or natural gas, or it may be a financial instrument (a monetary contract between entities), such as a weather derivative (an index-based strategy to reduce risk associated with adverse weather conditions).

Early futures trading

Futures trading can be traced to Europe in the 18th century. The immediate predecessor was the “to-arrive” contract. This was simply a contract for the purchase of goods upon their arrival. For example, ship cargoes were often sold before their arrival in port on a “to-arrive” basis. The to-arrive contract filled an important need in the grain trade in the United States, which had expanded rapidly during the 19th century. Grain prices, during the early stages of American development, were subject to a seemingly endless cycle of boom and bust. At the end of the crop year, farmers would flood the market with grain, and prices would drop drastically. Grain would then be left to rot, or simply be dumped, as prices became so low that transporting it to market became a losing proposition. Later in the crop year, shortages would develop and prices would rise as dramatically as they had fallen.

Consequently, buyers and sellers sought to provide for their needs by contracting for the delivery of quantities and grades of grain at an agreed-upon price and delivery date in the future, depending on when the grain would be needed and when it was available. This was accomplished through to-arrive or forward contracts. Soon a practice developed whereby these to-arrive contracts were themselves bought and sold in anticipation of changes in market prices.

Just as futures contracts are nothing new, neither is fraud new to commodity markets. In the 1880s, “bucket shops,” an early form of commodity fraud, appeared. A bucket shop is an establishment where bets can be made on current prices for commodities. The bets are not executed as contracts on any exchange but rather are placed on the bucket shop’s books, just as would be done by bookies, who offset their bets by their own resources. Such resources were often sadly lacking, as discovered by successful wagerers when they came to collect their winnings.

The Chicago Board of Trade sought to stop the bucket shops by cutting off access to its market quotations, upon which the bucket shop operations were wholly dependent for their operations. Nevertheless, the bucket shops continued to thrive, as a result of competition from other exchanges that provided the bucket shops with market quotations. States attempted to pass legislation regulating bucket shops. By 1922 it was clear that neither the self-regulatory approach of the exchanges through their rules nor state laws would eliminate or even curtail the fraudulent bucket shops. Therefore, in 1922 the U.S. Congress enacted the Grain Futures Act, and in 1936 Congress passed further legislation to prevent manipulation and fraud in the futures market.

In 1974 Congress transferred authority for regulating the futures market from the U.S. Department of Agriculture to a newly created independent agency, the Commodity Futures Trading Commission (CFTC). The CFTC continued the regulation of futures exchanges through self-regulation with federal oversight. The CFTC created a division of enforcement to sanction exchange members who engaged in deceptive or fraudulent activities.

The CTFC and fraud

The CFTC’s first non-option-related fraud case involved the American International Trading Company (AITC), a Los Angeles-based company. In the 1970s the company offered a managed-account program for trading in commodity futures contracts and required an investment of as little as $2,000. AITC promised profits to speculators and guaranteed customers that they would not lose more than they invested; that is, customers would not be subject to margin calls. The program was widely advertised in Los Angeles. Individuals involved in making decisions regarding AITC investments even conducted television shows on a Los Angeles financial broadcast station, where one of their guest stars was Jack Savage, who acted as an adviser to AITC.

The CFTC charged that Savage and AITC operated a scheme to cheat and defraud customers. One way this was carried out was by wash sales. AITC advisers entered opposite buy and sell orders for AITC customers that had no effect except to generate commissions for AITC. In addition, it was charged that an AITC adviser and Savage entered into prearranged trades for customers on the floor of the MidAmerica Exchange in a manner that allowed Savage to make large profits to the detriment of AITC customers. AITC was additionally charged with entering into a series of “Robin Hood” transactions where profitable sides of offsetting trades were allocated to customers whose equity had declined below zero, requiring AITC to meet their margin calls. The nonprofitable sides of those trades were placed in the accounts of AITC customers with positive equity balances. This trading effectively transferred funds from customers with positive equity balances to customers with negative balances.

The CFTC obtained injunctive relief and administrative sanction against AITC advisers, Savage, and others. AITC was closed down, and a civil penalty of $250,000 was imposed by consent, although it was never collected. Savage appealed the injunction obtained by the CFTC. Although he was successful in some issues, the injunction was affirmed in other respects.

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