Responding to a reported explosion of illegal foreign currency exchanges in the wake of the Asian economic crisis, the state Department of Corporations on Monday said it has ordered at least 17 firms in Los Angeles and Orange counties to stop offering commodity contracts in foreign tender.
The companies were served with cease-and-desist orders over the past few days. If they continue to hawk the contracts, which have purportedly netted between $5,000 to $200,000 from unsuspecting investors, the businesses could be targets of civil and even criminal litigation, said department enforcement official Bill McDonald.
He said the department has received dozens of complaints. "Everyone who has complained to us has lost all their money and we haven't seen a customer who has made a nickel."
The action marks the department's third sweep of such companies since the U.S. 9th Circuit Court of Appeals ruled in 1996 that federal regulators had no jurisdiction over foreign currency trading, leaving state agencies such as the Department of Corporations the only watchdogs of the practice.
McDonald said the transactions are illegal because California considers the companies' foreign currency activities futures trading and, to the regulators knowledge, none of the companies cited have a license from the federal Commodities Futures Trading Commission to sell any type of futures.
The companies allegedly focused on Asian immigrant investors, allegedly promising a substantial return on investment speculating in volatile Asian currencies.
Susan Liu, an employee at one of the companies cited, Golden Capital International Financial Inc. of Alhambra, said her offices have closed in compliance with the order. Company executives were considering whether to appeal.
Attorneys for another firm, DFX Inc. of San Bernardino, said they intend to appeal the order.
Other companies cited included: Cash Investment Group, Industry; Centrex Management Inc., Los Angeles; China Development Group Corp., El Monte; CMI Inc., Los Angeles; Currex International Corp., Los Angeles; Fortrex Management Corp., Los Angeles; General Financial, Los Angeles; Global Risk Management, Los Angeles; Morex Financial Inc., Los Angeles; Newport Chase Trust Capital Growth, Newport Beach; Newportchase International Inc., Newport Beach; Noble Wealth Inc., Burbank; Draco Trading Inc., Pasadena; Optima Financial Services, Pasadena; and TDM Global Exchange, Los Angeles.