In its seventh case challenging deceptive advertising claims made by "day trading" investment advisors, the Federal Trade Commission has filed suit in U.S. District Court against Timothy Cho and Tim Cho Investment Corporation ("TCI"), alleging that the defendants made false and deceptive advertising claims for TCI's training seminar on day trading. The agency seeks a court order directing Cho and TCI to stop making false and deceptive claims and provide consumer redress or give up their ill-gotten gains. TCI is located in Irvine, California, and has affiliate offices throughout the country.
In May 2000, the FTC, Commodity Futures Trading Commission, and Securities and Exchange Commission announced a coordinated crackdown on deceptive trading promotions, and halted the claims of 14 online firms that promised to share the secrets of making easy money with little risk, using their trading strategies. This lawsuit represents a continuation of the FTC's enforcement efforts against these deceptive practices.
The FTC complaint states that, since 1998, Cho and TCI have used the Internet, newspapers and bulk e-mail to advertise a $6,000 two-day training seminar on day trading and other techniques for trading stocks, currencies and Standard & Poor's (S&P) futures contracts. The FTC alleges the defendants have claimed that, by using the techniques taught in the training seminar, investors can reasonably expect:
- to achieve substantial profits (for example, 18 percent per trade);
- that 12 out of every 13 trades will be profitable;
- to earn six to seven figures annually (or more than $1,000,000);
- to have made $179,070 in 179 trades in 1998 and 1999;
- to have made $305,900 in 393 winning trades in the first nine months of 2000;
- to earn a guaranteed 1000 percent return in trading S&P futures contracts within one year.
The FTC alleges that the defendants lacked substantiation for these claims, and that they were deceptive.
The ads also conveyed that investors can expect to trade profitably with little financial risk, the FTC alleged. In fact, the FTC complaint says, investors cannot reasonably expect to trade with little financial risk, and the claim is therefore false. The relief sought by the FTC includes an order halting the false and unsubstantiated claims and providing for redress to consumers or disgorgement of ill-gotten gains.
The Commission vote to file the complaint was 5-0. It was filed in the U. S. District Court for the Central District of California, Southern Division, in Santa Ana, March 15.
This case was brought with the invaluable assistance of the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts.
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. A complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.
Copies of the complaint are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357). The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
(FTC File No. 002 3023)
(Civil Action No. SACV01-331DOC(EEx))
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