In early April we received a phone call from someone named “Monica Ross” who said she worked in Hong Kong for a company called “Center Capital Trading”.  She wanted to know if I would speak to a trader named “Eric Hansen” and would I take a call from him regarding investing in gold options?  I had been approached in 2009 with a similar approach and, since gold had proved to be a good investment at that time, I thought I would talk to this man.  He claimed to be a “third level trader” with the company and that he had 33  years of experience in options trading and that Jeff Christian* at CMP was his boss.

He explained about pre-determining maximum risk by using options contracts.  He said that we could buy GCM10 options at $1200 and that we could expect a significant return if there was movement on the option.  The maximum loss would be no more than our investment at worst, but that we would never get close to that.   I inquired about fees, commissions, and where the options were trading.  He specified the NYMEX and that they worked solely on commission; that if we bought and sold when he told us to, we would make a lot of money.  He sounded very knowledgable and was certainly very persuasive;  so we decided to risk $6,000. 

We were then contacted by “Charlie Robson”, of the “Administration and Compliance” office, with a pre-compliance call.  He talked to us about how to send money, and that we would be contacted by a “Compliance Officer” named “Tom Logan”.   Charlie then sent account details of a trader to which we would send money.  We wired the money to them using Xetrade, a company I use to send US$ to Australia.

Eric Hansen was calling us nearly every day.  The Gold investment was looking good.  I was watching the options premiums on www.barchart.com.  Within a week he explained we had now profited $2000 with our $6000 investment and he wanted us to move into RBOB gasoline.  He wanted us to invest a lot of money in this.  I told him we could only do 20 options, maximum.

We would liquidate the gold positions at $8050 and invest an additional US$11,960 to make a $20,000 “weighted straddle” investment in RBN10 options: 15 calls and 5 puts.  There was an “institutional block buy” of options contracts being made by a large institutional client and we could “piggy back” on the trade without having to pay the ususal commission.   We received instructions to wire funds to a new trading company, which we did, again using Xetrade.

They also set us up with an online trading account that, when I accessed it, looked suspiciously simple.  It was supposed to allow us to buy/sell/trade online, but all it did was show our current positions with the company.

Happily watching our “profits” grow, I became more suspicious for a number of reasons. 

First, this company fit the all the online profiles for a scam operation:

• Promise of easy money
• No registered company
• Probability of a virtual address.  Search of their address reveals another company in that location.
• Inconsistencies in the business procedures.  Typos in the websites and emails.  Lack of trading accounts.  No visibility for the “trading partners”. 
• Missing information such as proper addresses or phone numbers.
• An unprofessional and inconsistent website.
• Domain name creation date within the last few months.
• No registration in NFA of any of the “traders” to whom I was to send funds.

Second, their website was only registered in February 2010 with hidden ownership

Third, I found two other virtually similar websites at www.coopereverett.com and on a cached web page of www.carghillwright.com. As of this writing(4 June 2010), there cached coopereverett.com website is no longer there, but the cached version is.  These pages were 98% identical to those of Center Capital Trading, with similar logos and identical text, structures and links.  When I checked with the “whois” database the domain names were also recently created and the owners were anonymous.  Hosting was by Tucows and GoDaddy, two large hosting services noted for cheap hosting.

RESULTS OF GOOGLE SEARCH:

Fourth, the way of doing business just didn’t seem professional enough for a supposedly big company (or even a small one); and why would a “senior trader” be spending his supposedly valuable time calling me every other day and walking me through the ins and outs of the options trading business?   When he talked about the marriage season in India (higher gold demand) and the summer driving time (higher gasoline demand) I realized that this didn’t make sense – the market HAD to factor these known seasonal fluctuations into the prices.

Furthur research turned up another company at the given address (exact building and office number). A phone call to the company established that “Center Capital Trading was not known to them.  Another online company was offering “virtual office space” in the same building (99 Queens Road Central, Hong Kong) including Hong Kong phone numbers and fax numbers.  You could be anywhere in the world, and still pretend to be in Hong Kong.

Having decided that we needed our money back, fast, I told a story to Eric that I really wanted to invest a LOT of money with them but I needed my initial investment back first.  He was reluctant, he said, to get out of the market at that point and I said we would discuss it tomorrow.  The next day I was called by Charlie Robson and was told they had already “sold my positions” for zero loss or profit, and a very special favor was being extended to me to cash out.  They would return only my initial cash, leaving behind the “profit” on the gold.  Then, as it turned out, they had never actually received the money!   Xetrade was not able to use their “CHIPS” ID, which turned out to be an anonymous identifier to provide funds to a trader without revealing the source or sink of the funds, or so it was explained.  The bottom line was that the money had been sent BACK  to Xetrade from the respective recipient banks and Xetrade simply returned it to my own bank account.  This was very fortunate for me; I only lost a few hundred in fees and foreign exhange differences. 

The explanation that they had to wait for the end of the option period for the option writer to pay on the options before I could be paid also made no sense.  If they were trading options futures on the NYMEX then these are bought and sold on a daily basis.  I don’t think you have to wait for the expiry date for a payoff unless you are buying or selling the futures themselves.  Charlie said they had to be “filled or killed” – a phrase I never understood in this context – I became certain that this was a scam and that if the bank transfers had gone through I never would have seen any money ever retuned to me, no matter how the market had gone.  I wonder if there ever were any options or options contract purchased on my behalf or by the “company” at all. 

Lastly, when my positions were “closed” at the end, I never received a “Trade Card” by email, nor did my online account work ever again.  Although the proof is not totally solid, all evidence points to a scam. No legitimate company would act this way.

I was lucky. It is my hope that this scam be exposed and that others do not lose any money to this company.