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U.S. Moves to Close Internet Trading Course

Investing: Commodity futures agency says pair from O.C. misrepresented their background and methods.

September 28, 2000|From Bloomberg News

Federal regulators accused two Orange County Web site operators of lying to customers about their backgrounds and trading history to lure investors to their online course on trading commodity and stock options.

The Commodity Futures Trading Commission contends in a lawsuit filed Tuesday that Rabb Sabin of Silverado Canyon and Art Smith of Orange fraudulently misrepresented the profitability of their trading methodology and acted as unregistered commodity advisors.

The commission asked the U.S. District Court in Los Angeles to shut down their Web site, called the Cash Nursery, and order them to repay customers. The commission did not specify how much was lost.

Sabin and Smith also operate Westar Financial Services, the agency said.

The charges, stemming from protests by disgruntled customers of the Cash Nursery, are part of the commission's crackdown on get-rich-quick schemes touted on the Internet.

Sabin, the Web site's founder, denied wrongdoing.

Sabin and Smith, the site's operations manager, "did a lot of things wrong in connection with their solicitation of customers for their trading advisory business," said Dan Nathan, a deputy enforcement director at the agency.

"They made falsehoods about their own success rate," he said. "To the extent they reported on results, they were either hypothetical results or outright false."

Since 1996, the Cash Nursery has promised investors that they could double their money in 90% of trades by following its method, the agency's complaint alleges.

Besides asking that the Web site be shut down, the agency is seeking fines of $110,000 for each commodity law violation, or triple the Cash Nursery's monetary gain.

Sabin, 53, said in an interview that he changed misstatements that had been posted earlier on the Web site. Moreover, he said, his trading system is successful for the majority of students in his course. Smith, 55, could not be reached for comment.

"I like helping people. I'm not here to rip them off," Sabin said. "If they follow all the trading rules, they will make a profit."

He admitted that the site misrepresented that he was a Vietnam veteran and that he held both college and graduate school degrees. Those misrepresentations are no longer on the site, and the site now touts a 50% return on 90% of trades.

"Some things have been changed, but there's no question that there's still problems with the Web site," Nathan said.

The Web site accepts about 350 students each year, taking in an average of $7,500 a month before January 1999 and almost $300,000 last year, Sabin said. He said the site stopped advising customers on commodities trading this year and now only teaches stock options trading methods.

The Cash Nursery charges people $195 to $1,295 to enroll in its online courses for a set period, Sabin said. At the end of each section, the student must pass a quiz to proceed to the next level.

One former customer complained that because of this structure, students run out of time on their enrollment before they can complete the program.

"He doesn't even have a system," Gary Evans said about Sabin. "He teaches you a few things that are pretty obvious."

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