A recent SEC action alleges Broker Swaps Fraud. This is a type of investment fraud in which financial firms offer investment vehicles to investors for a fee. In order to make money from these swaps, these brokers use a third party broker, or counterparty. The counterparty is another financial institution, such as a bank or stockbroker. In this case, the CFTC believes that the brokers misrepresented the CDS and subsequently caused their client accounts to suffer loss.

The fraudsters impose unrealistic requirements on investors, including claiming profits from their trading without any documentation. As a result, they charge their customers thousands of dollars. This is a significant waste of money. The investors receive regular reports, live text updates, and regular statements about their investments. They fail to notice that the broker exceeds their expectations. Often, this scammer will demand $1,500 in commission, $800 in taxes, and $200 in money transfer fees, and then disappear without paying.

The fraudulent broker will offer investors investment vehicles they don’t fully understand. They then attempt to make the transaction look like it is an “arms length” transaction between two financial institutions. But, in reality, the trade isn’t at arm’s length. Instead, the broker is the counterparty. The investor is not an expert in this type of trading, so he can’t understand the ramifications of the fraud.