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Main » Articles » Other

Forex Pools and Promissory Notes Scams

In realizing the goal of defrauding investors, the fake money managers and directors of forex HYIP programs utilize many different financial tools and mediums. While the basic principles of all these activities are both the same and simple, the details of two separate scams rarely match each other. In this article, we’ll discuss the forex promissory note, and its use in combination with an illegal forex pool.

A Promissory Note is a financial contract where the issuer makes an unconditional commitment to pay the receiver of the promissory note (the payee) an amount of money at a predetermined date, or on demand by the payee. The promissory note is used in borrowing and lending for commercial purposes by individual, corporate and other institutional entities and it is also a popular form of contract in cases where the issuer (for example, a mortgage borrower) is unable to pay a large amount in a single installment.

In essence, a promissory note is an acknowledgement that the issuer owes an amount of money to the payee. The document details payment terms, such as the interest rate, maturity terms, and whether the loan is collateralized or not. Forex scammers make use of this relatively detailed and confidence-inspiring form of contract by selling it to investors for a sizable sum of money in return for participation in a forex pool and the imagined future profits.

What is a forex pool? A forex pool is simply a pool of funds which is managed by an investment manager in return for a fee. The manager solicits funds from investors, combines those funds into a pool and uses the funds in the pool to trade in a market, be it forex, stocks, or any other one. Beyond the subjects which we discussed in the articles on HYIPs, and fake money managers, the investor who would like to participate in these pools must keep a number of important points in mind.

In the US, forex pools are regulated by the SEC if the operations of the pool spread across state lines. Precisely due to the frequent occurrence of fraud, these types of investment pools are strictly regulated at multiple levels, and as such, a legitimate forex pool will provide a disclosure document with required SEC and State disclaimers. This document is on average 40 to 200 pages long. An illegal forex pool will not mention any regulation by any entity and is highly unlikely to provide any disclaimers.

More importantly, in many states it is illegal to solicit funds form a non-accredited investor to a forex pool, which means that unless you have a net worth of at least one million dollars and an income of at least $200,000 in the past year, a forex pool cannot legally solicit for your participation.

In addition, forex pools are restricted to a maximum aggregated dollar amount by the SEC. A REG D 506 (which is a SEC regulation number) exempt pool may only have a maximum of 35 non-accredited investors and an unlimited number of accredited investors. A REG D 504 exempt one may have unlimited non-accredited investors but is restricted to a maximum investment of all investors in the pool of $1,000,000. Both REG D 506 and REG D 504 exempt pools are restricted and regulated by the SEC and the state where the investor resides. But in many cases, the fake forex pools are not regulated by anybody, and do not possess any exemption status due to their shadowy nature.

So, when the manager of the forex pool insists to you that his promissory note is not a security and that his pool is not regulated by the SEC, do not listen to his songs of deceit: Promissory notes are securities, and as such, they are regulated by the SEC, by the Division of Securities where the promissory note was issued, as well as by the state where the company issuing the note is incorporated. In sum, unless the promissory note handed over to you is issued by a regulated entity, it is completely worthless and if you desire to entrust any funds to the fake forex pool, you’d save yourself from a lot of trouble by being satisfied with a few words of reassurance by the scammer and doing away with the note altogether.

TN, SC, NC and CA are the leaders in promissory note fraud, but the phenomenon is certainly not limited to these states. These and similar fake investment proposals are in direct violation of the laws of both the SEC and the state where you reside. Report them to the FBI at 305-944-9101, the Department of Justice at 202-514-2000, the CFTC at 202-418-5000 and the SEC at 202 551-3500, in addition to the Division of Securities in the state you reside. You wouldn’t hand your money over to a stranger in return for a promise of massive and implausible returns; do not give your savings away to people whose promises are not worth the paper of the promissory note on which they are printed.

Category: Other | Added by: forex-market (2009-09-24)
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