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March 20, 2009 7:35 pm
US federal regulators have warned of a “rampant Ponzimonium” as they disclosed they are investigating “hundreds” of possible scams in the aftermath of the $50bn fraud allegedly perpetrated by Bernard Madoff.
Bart Chilton, a commissioner at the Commodities Futures Trading Commission, the US regulator, said the watchdog was “seeing more of these scams than ever before” in commodities and other futures markets.
Mr Chilton said the CFTC, which patrol commodities and financial futures markets such as derivatives on stocks and foreign exchange, was investigating “hundreds of individuals and entities, many of which were related to Ponzi scams”.
The CFTC has filed charges against 15 alleged Ponzi schemes so far this year, compared with 13 during the whole of 2008. If the rate were sustained, the regulator could end the year filling more than 60 cases, officials said.
US regulators have said they are detecting more scams than before as the publicity surrounding Mr Madoff‘s case prompts some investors to question the credibility of returns.
But this is the first time a senior regulator has publicly put the number of investigation in the “hundreds”.
“The floundering economy has unearthed many of these house-of-card scams,” said Mr Chilton. “In the last month alone we’ve gone after crooks in Pennsylvania, New York, North Carolina, Iowa, Idaho, Texas and Hawaii.”
Mr Chilton did not provide details of the investigations but it is likely the majority of the cases relate to small investments, in the range of a few million dollars to $50m (€37m, £35m). In the latest case, the CFTC this week charged a North Carolina investment company over an alleged $40m Ponzi scheme in foreign exchange trading.
“These frauds combined harmed tens of thousands of hard-working Americans, many of whom thought they were investing properly to save for retirement or even their first home,” said Mr Chilton.
“It is a good thing that folks are double-checking to ensure they aren’t being ripped off by fraudsters,” he said, referring to the increasing number of investors who are tipping off US federal regulators after they have become suspicious.
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