FTC RETURNS NEARLY $2 MILLION TO CONSUMER VICTIMS OF MULTI-LEVEL MARKETING PROGRAM FRAUD SCHEME

FROM:  FEDERAL TRADE COMMISSION
FTC Returns Almost $1.9 Million to Consumers in BurnLounge Pyramid Scheme

The Federal Trade Commission is mailing 52,099 checks totaling almost $1.9 million to consumers who lost money to a pyramid scheme that pretended to be a legitimate multi-level marketing program selling opportunities to operate online digital music stores.

In June 2014, the FTC won an appeals court ruling upholding a district court finding that BurnLounge had operated a pyramid scheme.

Consumers who receive the checks from the FTC’s refund administrator for this matter, Gilardi & Co. LLC, should deposit or cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed. The amount will vary based upon the amount of each consumer’s loss.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FTC RELEASES NATIONAL RANKING OF CONSUMER COMPLAINTS FOR 2014

FROM:  U.S. FEDERAL TRADE COMMISSION
Identity Theft Tops FTC’s Consumer Complaint Categories Again in 2014
Agency Also Notes a Large Increase in Complaints About “Imposter” Scams

Identity theft topped the Federal Trade Commission’s national ranking of consumer complaints for the 15th consecutive year, while the agency also recorded a large increase in the number of complaints about so-called “imposter” scams, according to the FTC's 2014 Consumer Sentinel Network Data Book, which was released today.

Imposter scams – in which con artists impersonate government officials or others – moved into third place on the list of consumer complaints, entering the top three complaint categories for the first time. The increase in imposter scams was led by a sharp jump in complaints about IRS and other government imposter scams. Debt collection held steady as the second-most-reported complaint.

“While identity theft remains a huge issue, consumers should also keep a close eye out for imposter scams,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Whether it’s pretending to be the IRS during tax season, or making false promises of a lottery win, scammers are increasingly sophisticated in their efforts to deceive consumers, but the FTC will continue working to shut these scammers down.”

The Consumer Sentinel Network Data Book is produced annually using complaints received by the FTC’s Consumer Sentinel Network. That includes not only complaints made directly by consumers to the FTC, but also complaints received by state and federal law enforcement agencies, national consumer protection organizations and non-governmental organizations.

The report includes not only national data but also a state-by-state accounting of top complaint categories and a listing of the metropolitan areas that generated the most complaints. In 2014, 2,582,851 complaints were entered into the Consumer Sentinel Network. Florida was the top source of complaints per capita both for identity theft, and fraud and other complaints. For fraud and other complaints, Georgia and Nevada had the second and third highest per capita complaint rates, while Washington and Oregon were in the second and third position for identity theft complaints.

The complaint categories making up the top 10 are:

  Number Percent
Identity Theft     332,646 13 percent
Debt Collection 280,998 11 percent
Imposter Scams 276,662 11 percent
Telephone and Mobile Services 171,809 7 percent
Banks and Lenders       128,107 5 percent
Prizes, Sweepstakes and Lotteries   103,579 4 percent
Auto-Related Complaints   88,334 3 percent
Shop-At-Home and Catalog Sales 71,377 3 percent
Television and Electronic Media   48,640 2 percent
Internet Services   46,039 2 percent
A complete list of all complaint categories is available on page six of the report.

The Consumer Sentinel Network’s secure online database is available to more than 2,000 civil and criminal law enforcement agencies across the country and abroad. Agencies use the data to research cases, identify victims and track possible targets.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC WARNS BIODEGRADABLE DOG WASTE BAG CLAIMS MAY BE DECEPTIVE

FROM:  U.S. FEDERAL TRADE COMMISSION 
FTC Staff Warns Marketers and Sellers of Dog Waste Bags That Their Biodegradable and Compostable Claims May Be Deceptive

Staff of the Federal Trade Commission has sent letters warning 20 manufacturers and marketers of dog waste bags that their “biodegradable,” “compostable,” and other environmental claims may be deceptive.

The letters, which the staff sent after examining the companies’ environmental, or “green,” claims on their websites and in other media, provide examples of potentially deceptive statements regarding the bags’ biodegradability or compostability. The letters also provide information on how to comply with truth-in-advertising principles when making environmental claims.

“Consumers looking to buy environmentally friendly products should not have to guess whether the claims made are accurate,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It is therefore critical for the FTC to ensure that these claims are not misleading, to protect both consumers and honest competitors.”

The staff notified 20 marketers that they may be deceiving consumers with the use of their unqualified “biodegradable” claim.  Based on the FTC’s  Guides for the Use of Environmental Marketing Claims (the Green Guides), such a claim without any qualification generally means to consumers that the product will completely break down into its natural components within one year after customary disposal.  Most waste bags, however, end up in landfills where no plastic biodegrades in anywhere close to one year, if it biodegrades at all.

According to the Green Guides, consumers generally think that unqualified “compostable claims” mean that a product will safely break down at the same rate as natural products, like leaves and grass clippings, in their home compost pile. If marketers disclose that a product will only compost in commercial or municipal facilities, consumers think that those facilities are generally available in their area. However, dog waste is generally not safe to compost at home, and very few facilities accept this waste. Therefore, compostable claims for these products are generally untrue.

The FTC advised the companies that they should review their marketing materials and contact agency staff to tell them how they intend to revise or remove the claims, or explain why they won’t.

The staff notes that marketers who did not receive a letter should not assume that their claims are fine. Staff is not disclosing the recipients of the letters at this time.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

CONSUMERS HURT BY BUSINESS COACHING SCAM RECEIVING REFUNDS IN THE MAIL FROM FTC

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Sends More Than $4.4 Million in Refunds to Consumers Harmed by Business Coaching Scam

The Federal Trade Commission is mailing more than $4.4 million in refund checks to 2,004 consumers harmed by the Ivy Capital business “coaching” scheme, which falsely claimed that it would help them develop their own Internet businesses.

Ivy Capital Inc. and 29 co-defendants allegedly took more than $130 million from people who paid thousands of dollars – some paid up to $20,000 – believing they would earn up to $10,000 per month. But the promised coaching program was worthless. Most of the defendants agreed to settle FTC charges that they misrepresented the program and its earning potential, and failed to fully disclose and honor their refund policy. A district court granted summary judgment against five defendants. Litigation continues against Benjamin Hoskins, Dream Financial, and three relief defendants, Leanne Hoskins, Oxford Financial LLC, and Mowab Inc., who filed an appeal. Five defendants defaulted.

Affected consumers will receive more than 55 percent of the amount they lost. Those who receive checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed. Those with questions should call the refund administrator, Rust Consulting, Inc., at 1-866-591-7254, or visit www.FTC.gov/refunds for more general information.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FTC TESTIFIES BEFORE CONGRESS ON GEOLOCATION PRIVACY AND SECURITY

FROM:  U.S. FEDERAL TRADE COMMISSION

FTC Testifies on Geolocation Privacy

June 4, 2014

The Federal Trade Commission testified before Congress o
n the Commission's efforts to address the privacy concerns raised by the tracking of information about consumers’ location, as well as proposed legislation to protect the privacy of geolocation data.

Delivering testimony before the Senate Judiciary Committee’s Subcommittee for Privacy, Technology and the Law, Jessica Rich, Director of the FTC Bureau of Consumer Protection, outlined the FTC’s ongoing efforts to protect the privacy of consumers’ geolocation information through enforcement, policymaking, and consumer and business education.

Precise geolocation data is sensitive personal information increasingly used in consumer products and services, the testimony states. These products and services make consumers’ lives easier and more efficient, but the use of geolocation information can raise concerns because it can reveal a consumer’s movements in real time and provide a detailed record of a consumer’s movements over time.

“Geolocation information can divulge intimately personal details about an individual. Did you visit an AIDS clinic last Tuesday? What place of worship do you attend? Were you at a psychiatrist's office last week? Did you meet with a prospective business customer?” the testimony states.

Geolocation information may be sold to companies to help build profiles about consumers without their knowledge or consent, or it could be accessed by cybercriminals, hackers or through surreptious means such as “stalking apps.”

The FTC has used its enforcement authority under Section 5 of the FTC Act to take action against companies engaged in unfair or deceptive practices involving geolocation information. Last month, for example, the Commission entered into a settlement with the mobile messaging app Snapchat, resolving FTC allegations that Snapchat made multiple misrepresentations to consumers about the disappearing nature of messages sent through its service, as well its transmission of users’ geolocation information. The FTC has raised similar allegations involving undisclosed collection and transmission of location data as part of  privacy complaints against a popular flashlight app, as well as a national rent-to-own retailer and one of its software vendors, the testimony states.

In addition to its enforcement activities involving geolocation information, the Commission has conducted studies, held workshops, and issued reports on mobile privacy disclosures, mobile apps directed to kids, and other topics that elucidate best practices for companies collecting, using, and sharing geolocation information, the testimony says.

The testimony also notes the FTC’s ongoing efforts to educate consumers and businesses about protecting the privacy of geolocation information. For instance, the Commission recently released an updated version of ''Net Cetera: Chatting with Kids About Being Online," and it has released guidance directed to businesses operating in the mobile arena to help educate them on best practices to handle sensitive information, such as geolocation information.

The testimony also provides the Commission’s initial views on the Location Privacy Protection Act of 2014, proposed legislation that seeks to improve the transparency of geolocation services and give consumers greater control over the collection of their geolocation information. The FTC supports the goals of the LPPA, and believes it is an important step forward in protecting consumers’ sensitive geolocation information, the testimony states.

In particular, the testimony highlights three important LPPA provisions that are consistent with the Commission’s views:

The bill defines “geolocation information” as information that is “sufficient to identify the street name and name of the city or town” in which a device is located. This definition is consistent in many respects with the definition of “geolocation information” in the Commission's COPPA Rule.

The LPPA requires that an entity collecting consumer geolocation information disclose its collection of such information. The Commission has recommended that companies make their data collection practices more transparent to consumers.
The LPPA requires affirmative express consent from consumers before a covered entity may knowingly collect or disclose geolocation information, and the Commission supports that approach.

In addition, the testimony notes that the LPPA gives the Department of Justice sole enforcement authority and rulemaking authority, in consultation with the FTC. As the federal government’s leading privacy enforcement agency, the testimony recommends that the Commission have rulemaking and enforcement authority with regard to the civil provisions of the LPPA, and that DOJ have enforcement authority for the criminal provisions.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

CFTC OFFICIAL'S TESTIMONY REGARDING FUTURES MARKET OVERSIGHT

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Testimony of Vincent McGonagle, Director Division of Market Oversight, Commodity Futures Trading Commission Before the Financial Institutions and Consumer Protection Subcommittee Senate Committee on Banking, Housing, and Urban Affairs

January 15, 2014

Chairman Brown, Ranking Member Toomey, and Members of the Subcommittee, thank you for the opportunity to appear before you today. I am Vincent McGonagle and I am the Director of the Division of Market Oversight of the Commodity Futures Trading Commission (CFTC).

Background on Commodity Exchange Act and the CFTC Mission

The purpose of the Commodity Exchange Act (CEA) is to serve the public interest by providing a means for managing and assuming price risks, discovering prices, or disseminating pricing information. Consistent with its mission statement and statutory charge under the CEA, the CFTC is tasked with protecting market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives – both futures and swaps – and to foster transparent, open, competitive and financially sound markets. In carrying out its mission and statutory charge, and to promote market integrity, the Commission polices derivatives markets for various abuses and works to ensure the protection of customer funds. Further, the agency seeks to lower the risk of the futures and swaps markets to the economy and the public. To fulfill these roles, the Commission oversees designated contract markets (DCMs), swap execution facilities (SEFs), derivatives clearing organizations, swap data repositories, swap dealers, futures commission merchants, commodity pool operators and other intermediaries.

The CEA has for many years required that any futures transaction, unless subject to an exemption, be conducted on or subject to the rules of a board of trade which has been designated by the CFTC as a DCM. Sections 5 and 6 of the CEA and Part 38 of the Commission’s regulations provide the legal framework for the Commission to designate DCMs, along with each DCM’s compliance requirements with respect to the trading of commodity futures contracts. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), DCMs were also permitted to list swap contracts. Along with this expansion of product lines that can be listed on DCMs, the Dodd-Frank Act also amended various substantive DCM requirements, under CEA Section 5, and adopted a new regulatory category for exchanges that provide for the trading of swaps (SEFs).1 The Commission revised its DCM regulations to reflect these new requirements, and also adopted regulations to implement the Dodd-Frank Act’s SEF requirements.

Under the CEA and the Commission’s contract and rule review regulations, all new product terms and conditions, and subsequent associated amendments, are submitted to the Commission before implementation. In submitting new products and associated amendments, DCMs and SEFs are legally obligated to meet certain core principles; one of the most significant being the prohibition, in DCM and SEF Core Principle 3, on listing contracts that are readily susceptible to manipulation.2 DCMs and SEFs self-certify most of their products to the Commission, as allowed under the CEA,3 and self-certified contracts may be listed for trading shortly after submission.4 The Commission has provided Guidance to DCMs and SEFs on meeting Core Principle 3 in Appendix C to Part 38 of the Commission’s regulations. Failure of a DCM or SEF to adopt and maintain practices that adhere to these requirements may lead to the Commission’s initiation of proceedings to secure compliance.

Among other things, a DCM or SEF that lists a contract that is settled by physical delivery should design its contracts in such a way as to avoid any impediments to the delivery of the commodity in order to promote convergence between the price of the futures contract and the cash market value of the commodity at the time of delivery. The specified terms and conditions considered as a whole should result in a deliverable supply that is sufficient to ensure that the contract is not susceptible to price manipulation or distortion.5 The contract terms and conditions should describe or define all of the economically significant characteristics or attributes of the commodity underlying the contract, including: quality standards that reflect those used in transactions in the commodity in normal cash marketing channels; delivery points at a location or locations where the underlying cash commodity is normally transacted or stored; conditions that delivery facility operators must meet in order to be eligible for delivery, including considerations of the extent to which ownership of such facilities is concentrated and whether the level of concentration would render the futures contract susceptible to manipulation; delivery procedures that seek to minimize or eliminate any impediment to making or taking delivery by both deliverers and takers of delivery to help ensure convergence of cash and futures at the expiration of a futures delivery month.

Commission staff utilizes considerable discretion and can request that DCMs and SEFs provide full explanations of their compliance with the Commission’s product requirements. Commission staff may ask a DCM or SEF at any time for a detailed justification of its continuing compliance with core principles, including information demonstrating that any contract certified to the Commission for listing on that exchange meets the requirements of the Act and DCM or SEF Core Principle 3.

Expansion of CFTC Enforcement Authority Under Dodd-Frank

The Commission’s responsibilities under the CEA include mandates to prevent and deter fraud and manipulation. The Dodd-Frank Act enhanced the Commission’s enforcement authority by expanding it to the swaps markets. The Commission adopted a rule to implement its new authorities to police against fraud and manipulative schemes. In the past, the CFTC had the ability to prosecute manipulation, but to prevail, it had to prove the specific intent of the accused to affect prices and the existence of an artificial price. Under the new law and rules implementing it, the Commission’s anti-manipulation reach is extended to prohibit the reckless use of manipulative schemes. Specifically, Section 6(c)(3) of the CEA now makes it unlawful for any person, directly or indirectly, to manipulate or attempt to manipulate the price of any swap, or of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity. In addition, Section 4c(a) of the CEA now explicitly prohibits disruptive trading practices and the Commission has issued an Interpretive Guidance and Policy Statement on Disruptive Practices.6

In addition, the Dodd-Frank Act established a registration regime for any foreign board of trade (FBOT) and associated clearing organization who seeks to offer U.S. customers direct access to its electronic trading and order matching system. Applicants for FBOT registration must demonstrate, among other things, that they are subject to comprehensive supervision and regulation by the appropriate governmental authorities in their home country or countries that is comparable to the comprehensive supervision and regulation to which Commission-designated contract markets and registered derivatives clearing organizations are respectively subject.

CFTC Coordination with Foreign and Domestic Regulators

The Commission recognizes that commodity markets are international in nature and, accordingly, regularly consults with other countries’ regulators. In particular, staff regularly consult with staff of the FCA (the LME’s home regulatory authority) as to market conditions with respect to products of mutual interest, including the LME’s recent introduction of warehouse reforms. The two agencies also participate in mutual information-sharing agreements for both market surveillance and enforcement purposes.

Similarly, the Commission formally and informally consults and coordinates with other domestic financial regulators. For example, the CFTC and the Federal Energy Regulatory Commission (FERC) have had a memorandum of understanding (MOU) in place since 2005 that provides for information exchange related to oversight or investigations. Earlier this month, FERC and the CFTC signed two Memoranda of Understanding (MOU) to address circumstances of overlapping jurisdiction and to share information in connection with market surveillance and investigations into potential market manipulation, fraud or abuse. The MOUs allow the agencies to promote effective and efficient regulation to protect the nation’s energy markets and increased cooperation between the agencies.

Again, thank you for the opportunity to appear before the Subcommittee. I will be pleased to respond to any questions you may have.

1 In addition to the provisions regarding listing of swaps on DCMs and SEFs, the Dodd-Frank Act provides that, unless a clearing exception applies and is elected, a swap that is subject to a clearing requirement must be executed on a DCM, SEF, or SEF that is exempt from registration under CEA, unless no such DCM or SEF makes the swap available to trade.

2 DCM and SEF Core Principle 3 states, “Contract Not Readily Subject to Manipulation—The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation.”

3 For example, while contracts can be submitted for approval, of the almost 5,000 contracts submitted by DCMs and SEFs since the Dodd-Frank Act was enacted, all were submitted on a self-certification basis, and over 2,000 contracts were certified in calendar year 2013 alone.

4 A DCM or SEF need wait only one full business day after the contract has been submitted to list the contract for trading.

5 Deliverable supply means the quantity of the commodity meeting the contract’s delivery specification that reasonably can be expected to be readily available to short traders and salable by long traders at its market value in normal cash marketing channels at the contract’s delivery points during the specified delivery period, barring abnormal movement in interstate commerce.

6 Antidisruptive Practices Authority, 78 FR 31890 (May 28, 2013),


Last Updated: January 15, 2014

FTC SETTLES WITH ACCRETIVE HEALTH, INC., REGARDING FAILURE TO PROTECT CONSUMERS' PERSONAL INFORMATION

FROM:  FEDERAL TRADE COMMISSION 
Accretive Health Settles FTC Charges That It Failed to Adequately Protect Consumers’ Personal Information

Accretive Health, Inc., a company that provides medical billing and revenue management services to hospitals around the country, has agreed to settle Federal Trade Commission charges that its inadequate data security measures unfairly exposed sensitive consumer information to the risk of theft or misuse.

In its complaint against the Chicago-based business, the FTC alleges the company failed to provide reasonable and appropriate security measures and procedures to protect consumers’ personal information, including sensitive personal health information. Accretive had access to a wealth of personal information about the patients of its hospital clients, including names, dates of birth, Social Security numbers, billing information and medical diagnostic information.

According to the complaint, Accretive’s failure to adequately safeguard such information led to a July 2011 incident in Minneapolis, Minn., where an Accretive employee’s laptop computer, containing 20 million pieces of information on 23,000 patients, was stolen from the passenger compartment of the employee’s car. The Commission alleges that Accretive created unnecessary risks by transporting laptops that contained sensitive personal information in a way that left them vulnerable to theft.

The complaint also alleges that Accretive failed to employ reasonable procedures designed to ensure that employees removed consumers’ personal information that they no longer needed from their computers; and that in certain instances, when the personal health information of consumers was used in training sessions for employees, Accretive failed to remove that information from employees’ computers after the training was finished. In addition, the FTC alleged that Accretive failed to adequately restrict employee access to consumers’ personal information based on an employee’s need for the information.

Under the terms of its settlement with the FTC, Accretive must establish a comprehensive information security program designed to protect consumers’ sensitive personal information. In addition, the company must have the program evaluated both initially and every two years by a certified third party. The settlement will be in force for the next 20 years.

FTC staff also sent a letter to Accretive indicating that it would not recommend an enforcement action related to allegations concerning Accretive’s debt collection practices in hospitals. The letter notes that while staff is declining to recommend a Fair Debt Collection Practices Act case against Accretive at this time, the practice of attempting to collect payment for prior debts from consumers while they are seeking treatment in an emergency room or other medical facility raises serious concerns.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Thursday, Jan. 30, 2013, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted online and following the instructions on the web-based form. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC requests that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each future violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

CFTC ISSUES ADVISORY REGARDING COMMODITY TRADING ADVISORS AND SWAPS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC’s Division of Swap Dealer and Intermediary Oversight Issues Advisory Concerning Commodity Trading Advisors and Swaps

Washington, DC — The U.S. Commodity Futures Trading Commission’s (CFTC or Commission) Division of Swap Dealer and Intermediary Oversight (DSIO) today issued an advisory that provides guidance regarding requirements imposed on commodity trading advisors (CTAs) resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The Dodd-Frank Act amended the statutory definition of CTA to include any person who engages in the business of advising others on swaps. Additionally, certain CTAs who were previously exempt from registration with the CFTC are now required to register because of the CFTC’s rescission of Commission Regulation 4.13(a)(4) and amendments to Commission Regulation 4.5. As a result, provisions of the Commodity Exchange Act (CEA) and CFTC regulations applicable to CTAs might, depending on the circumstances, result in new advisory obligations.

This advisory provides guidance on the potential new advisory obligations of CTAs arising from the Dodd-Frank Act. It also informs the newly expanded class of CTAs and those previously exempt CTAs as to the general regulatory framework, including: (1) provisions of the CEA and CFTC regulations applicable generally to CTA activities; (2) CTA advisory obligations with respect to swap risk disclosures; and (3) requirements relevant to CTAs that advise Special Entities on swap transactions.

FTC ANNOUNCES SHUTDOWN OF PAY TO OBTAIN PRIZE SWEEPSTAKES SCAM

FROM:  FEDERAL TRADE COMMISSION

At the request of the Federal Trade Commission, a federal court has halted a massive sweepstakes scam that has taken more than $11 million from consumers throughout the United States and dozens of other countries throughout the world, including Canada, the United Kingdom, France, and Japan. The FTC seeks to permanently end the allegedly illegal practices that have continued for seven years and return money to victims.

According to the FTC’s complaint, Liam O. Moran, a resident of Ventura, California, and his companies, mass mail personalized letters to millions of consumers telling them that they have won a large cash prize, typically more than $2 million with bold, large-type statements such as “Over TWO MILLION DOLLARS in sweepstakes has been reserved for you.” Consumers are told that they can collect the prize by sending in a small fee of approximately $20 to $30. The letters often indicate that recipients are “guaranteed” to receive the prize money if they pay the fee, and they create a sense of urgency by stating that it is a limited-time offer.

In “dense, confusing language,” often on the back of the letters, there are statements in direct conflict with the bold claims of major winnings. A very careful reader might learn that they in fact have not won, and that the defendants do not sponsor sweepstakes but instead claim only to provide consumers with a list of available sweepstakes. Consumers frequently fail to see or understand this language and send money to the defendants. The FTC alleges that this language does not appear designed to correct deceptive statements, but exists mainly as an attempt to provide a defense to law enforcement action. Consumers get nothing of value in exchange for their payment.

The defendants have sent more than 3.7 million letters during the past two years, including nearly 800,000 letters to people in 156 countries in the first half of 2013. They have collected more than $11 million from consumers since 2009. The vast majority of the victims of this scam appear to be over 65.

The court order temporarily stops the illegal conduct, freezes the operation’s assets, and appoints a receiver over the corporate defendants while the FTC moves forward with the case.

Moran’s co-defendants are Applied Marketing Sciences LLC; Standard Registration Corporation, also doing business as Consolidated Research Authority and CRA; and Worldwide Information Systems Incorporated, also doing business as Specific Monitoring Service, SMS, Specific Reporting Service, SRS, Universal Information Services, UIS, Compendium Sampler Services, and CSS.

The FTC would like to thank the United States Postal Inspection Service, the Vancouver Police Department, the Metropolitan Police in the United Kingdom, the National Fraud Intelligence Bureau, and the Australian Competition & Consumer Commission for their assistance in this case.

To learn how to avoid these kinds of scams, read the FTC's Prize Offers: You Don't Have to Pay to Play.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.