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U.S. Charges Firm With Selling Illegal Futures Contracts

June 24, 1997|From Bloomberg News

U.S. authorities on Monday filed fraud charges against a Marina del Rey telemarketing company, accusing it of selling as much as $14 million in illegal precious-metals futures contracts and cheating as many as 1,800 investors nationwide.

The Commodity Futures Trading Commission filed a two-count complaint against Golden State Bullion and four employees for allegedly promising investors quick riches through investments in gold, silver, platinum and palladium futures.

A U.S. District Court judge in Los Angeles ordered a freeze on the assets of the company Thursday, the CFTC said in a statement released Monday. An investigation is pending.

Charges were filed against company owner and President Richard David Otto of Corona del Mar and three telemarketers: Fred Ronald Williams of Pacific Palisades and Linton Samaru and Bruce Michael Paine, both of Venice.

All four face charges for allegedly selling illegal futures contracts that weren't traded on an organized exchange. They also are accused of fraud by falsely claiming that chances of huge profits were high and that the risk of losing an investment was small, the CFTC said in its complaint.

Each of the four faces fines of up to $220,000 each, plus the return of investors' funds.

Calls to the company's office weren't returned. Barbara Reinecke, a lawyer for Golden State Bullion and Otto, said she had no immediate comment.

Larry Norton, CFTC's associate director of enforcement in Washington, said Golden State Bullion collected about $14 million from an estimated 1,800 investors nationwide since 1994.

CFTC officials said they couldn't estimate the total amount of losses by investors, but it "appears the typical investor lost about two-thirds of his or her money," Norton said.

Investments by an individual ranged from $2,000 to $20,000. "This is a snapshot, and the numbers are awfully preliminary," Norton said.

The CFTC said COM Consultants Inc., which did business as Golden State Bullion, used "high- pressure sales pitch claims" to lure investors into purchasing precious-metals futures that weren't traded on the New York Mercantile Exchange.

The company promised "a return of three times to four times their investments in two to three months," the CFTC said. In fact, "Golden State customers consistently lose the bulk of their investments," the agency said.

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