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The U.S. Securities and Exchange Commission (SEC) has charged Gordon A. Driver (“Driver”) – of Las Vegas and Hamilton, Ontario – and his company Axcess Automation, LLC (“Axcess”) with securities fraud, claiming that the defendants raised $14.1 million from about 100 investors by promising weekly returns of up to 5 percent from trading in futures.

Specifically, the SEC’s complaint alleges that Driver and Axcess represented to the investors that their funds would be used to trade futures using a “proprietary software program” that Driver developed and that they would receive returns of 1 percent to 5 percent per week from the trading. According to the complaint, Driver and Axcess actually used only $3.7 million of the $14.1 million raised for futures trading and lost nearly all of it in trading. The complaint further alleges that Driver and Axcess operated a Ponzi scheme by using $10.7 million to pay investors and another $1.1 million to pay Driver’s personal expenses.

Notice two things about this case.  First, notice the representation that Driver had “proprietary” software that allowed him to generate these returns.  “Proprietary,” of course, is just a big word suggesting that the person who uses it has figured out something that no one else has ever been able to figure out – in this case, how to generate 1% – 5%.  Beware of anyone offering investments that rely on “proprietary” software or “proprietary” techniques.  When they say “proprietary” substitute “non-existent” and you will be much closer to the truth. 

Finally, notice the outlandish returns promised.  Nothing earns 1% to 5% per week – nothing.  But, remember, one of things that scam artists have learned from Bernie Madoff is that scams that promise a more modest return can run for much longer.  Expect scam artists to promise returns at least rock-throwing distance from a reasonable return from now on.  This will make them harder to spot, but will, hopefully, lead people to think as much of their nest eggs as banks do of their cash.  Banks hire private protection when moving cash rather than relying on the police, who may or may not be in the vicinity of any crime.  Investors need similar private protection for their nest eggs.