For Immediate Release:
SAINT PAUL, MN – With the recent collapse of these two high-profile commodity brokers, and the loss of hundreds of millions of dollars in customer funds, the Minnesota Department of Commerce has issued caution to all commodity investors.
This week the Cedar Rapids, Iowa based firm Peregrine Capital CEO Russ Wessendorf pled guilty to a $100 million commodities fraud spanning over 20 years. Last year, one of the largest commodity futures brokers, MF Global, collapsed in bankruptcy due to highly leveraged trades. During the subsequent bankruptcy it was alleged that $2 billion in customer funds had been misappropriated, ultimately leading the firm to settle for $90 million in a class action suit.
“Minnesota consumers need to do their homework and ask the right questions to the firms and individuals they work with while making any investment,” said Commissioner Rothman. “Just like looking both ways before crossing the street, investors need to stop, look, and fully understand the risks before investing. The less you know, the more vulnerable you may become.”
With the recent drought driving up agricultural prices, oil trading at its highest price of the year and the price of gold resting near decade highs, the attraction of investing in commodities has never been greater. While there are plenty of legitimate investments being made in the commodity markets, including investments in precious metals, energy, agricultural and financial products, there is significant potential for fraud to the average investor.
Before any investment, consumers are urged to go to the Minnesota Department of Commerce website to see if the individual or firm is registered with the state. To report suspicious activity, the Commerce Department’s Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602. Questions or consumer complaints can also be sent by email to firstname.lastname@example.org or by mail to the Minnesota Department of Commerce, 85, 7th Place East, Suite 500, Saint Paul, MN 55101.
Warning Signs of Fraud
Get-rich-quick schemes. There’s never a free lunch. Be very careful if you recently retired and feel the stress of living on a fixed income when consumer prices are on the rise. Once your money is gone, it can be impossible to get it back.
Predictions or guarantees of large profits. Always get as much information as you can about a firm or individual’s track record and verify that information—even if you know the people involved or they are recommended by friends or relatives. If you can’t get solid information about your investment and the company, don’t invest.
Promises of little or no financial risk. Be suspicious if the firm or individual says there is little risk. Be suspicious if someone tells you that a written risk disclosure statement is only a routine formality. Written risk disclosure statements are important to read thoroughly and understand.
Claims of trading in the “Interbank Market.” If a firm claims that they will trade foreign currency for you in the interbank market, or that you should trade in the interbank market, be cautious. The term “interbank market” refers to a loose network of currency transactions negotiated between financial institutions, usually banks and investment banks, and other large companies.
Unsolicited telephone calls about investing. Be skeptical if someone you don’t know calls you about investment opportunities.
Someone asking you to send cash immediately. Be extremely cautious if someone tries to convince you to send cash or transfer money to them immediately by overnight express, the Internet, mail, or any other method.
For more information on a list of the top ten "Scams, Schemes and Scandals" that investors should be aware of go to the Minnesota Department of Commerce Investor Education Website.