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CFTC Warns of Oil & Gas Investment Fraud Risk

December 5, 2016 Blog

In October, we reported that the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) had issued warnings to investors regarding investment programs and other fraud schemes in the oil and gas sector. The Commodity Futures Trading Commission (CFTC) has long warned of similar risks in the commodities market as well, and with the recent renewed focus on oil and gas scams, it is important for individual investors to be aware of the various types and warning signs of fraud.

Types of Oil & Gas Investment Fraud

When it comes to oil and gas investment scams, the CFTC warns of two specific types of fraud. The first involves community pool operators. Community pool operators are commonly individuals who build trust in a local community and then use this trust to solicit fraudulent “investments” in oil and gas commodities. These individuals typically are not registered brokers and they will often either steal investors’ funds outright or operate Ponzi-type schemes where they pay fabricated “profits” to early investors in order to generate additional interest and investment.

The second involves introducing brokers who promote commodity investment opportunities on radio and television, typically, “claim[ing] that seasonal trends in the demand for certain commodities or well-known current events (such as a hurricane or a terror attack) create an opportunity to make big money by trading in commodity futures and options.” These brokers often also promise “guaranteed” returns and use hard sell tactics once you call in from a radio or television advertisement.

Warning Signs of Oil & Gas Investment Scams

Before making any investment decision, it is critical that you do your own research and seek recommendations from a trusted advisor. Unfortunately, high-pressure boiler room operators will frequently seek to convince vulnerable investors to hand over their money over the phone, without seeking the advice they need in order to make an informed decision.

For example, the CFTC cautions that the following tactics are commonly associated with oil and gas scams and other types of commodity investment fraud:

  • “Get-rich-quick” schemes targeting individuals who are recently retired or have recently come into a large amount of money.
  • Guaranteed profits or “predictions” of unreasonably-high returns that are not backed by verifiable information.
  • Claims that there is little or no financial risk involved. Scam artists may also try to convince you not to review risk disclosures, frequently claiming that they are just “formalities.”
  • Unsolicited calls from people you do not know offering oil and gas investment opportunities. In many cases these people will claim that they have inside information or a “seasonal” investment opportunity based upon recent or expected fluctuations in the oil and gas markets.
  • Requests for immediate cash or credit card payment. If someone you do not know asks you to send money in the mail, provide credit card information over the phone or submit a payment online, these are all potential warning signs of oil and gas investment fraud.

Zamansky LLC | Attorneys Fighting for Individual Investors Nationwide

Located in the heart of Wall Street, Zamansky LLC is an investment fraud law firm that represents individual investors nationwide. If you believe that you may have lost money in an oil and gas investment scam, our attorneys may be able to help you recover your losses. For a free consultation, call (212) 742-1414 or contact us online now.