Investors complain about commodities that weren't: they tell judge company never delivered the goods.

Several Los Angeles investors last week told a judge stories of lost money, broken promises and dubious record-keeping during a hearing into the activities of Financial Service Investment Group. FSIG is one of 21 companies and 24 individuals in the L.A. and San Francisco areas that were accused by state prosecutors Jan. 11 of carrying out "affinity group" fraud.

The Feb. 9 hearing before L.A. Administrative Law Judge Milford Maron was the first scheduled for any of the L.A. outfits that allegedly enticed mostly Asian minority Angelenos into fraudulent trading of commodity contracts for foreign currencies, gold and silver.

Many of the firms were loosely connected, employing some of the same workers or executives, but prosecutors have hit them individually with administrative, civil or criminal actions.

FSIG was among six L.A.-area investment houses that were ordered by the state Department of Corporations to stop selling commodity contracts after authorities suspected they were selling commodity contracts in violation of the California Commodity Law of 1990.

That forbids sales by firms that don't trade through a registered commodity exchange -- unless they deliver the currency or precious metal to the customer within 28 days.

"From the start, I had a lack of knowledge of these things, and that's why I lost a lot of money," admitted Yun Oh, who invested with Mid-Wilshire-based FSIG after reading its Korean-language advertisement in the Korea Times newspaper. "I lost $10,000 in three hours. That's why I kept investing for five more months," said Oh, explaining that he hoped to recoup his losses.

Some who apparently made profits were not allowed to withdraw them after the firm closed down in late January and its owner, Francis Toh, could not be found, said several investors at the hearing. Oh said Toh promised him a check for $6,000 but never provided it.

The purported victims, however, were not confined to those of Asian heritage. Roy Vaughn and David Singer, both white, attended the hearing and said they feared fraud. "All of the documents I received from them -- it looked correct and above board," said Vaughn, who learned of FSIG by word of mouth. "But then when I withdrew money and they paid in cash, I began to suspect they were not legal."

Five Iranian-born investors told the Business Journal they knew of L.A. Iranians who collectively lost more than $200,000. Some read help-wanted ads in local Iranian newspapers that ultimately required investment with FSIG as a condition of employment as one of its brokers.

Judge Maron is expected to decide after March 16 whether to uphold the desist and refrain order put on FSIG by the corporations department. If upheld, it could put FSIG permanently out of business or result in civil or criminal charges, said department prosecutors.

Admittedly, commodity trading is risky when highly leveraged, and even investors dealing with name-brand firms trading on registered commodity exchanges can easily lose everything.

In FSIG's defense, attorney Albert C. Lum said that while commodity deliveries may never have happened, the trading agreements signed by each customer provided for delivery, if requested.

None of the investors gathered said he or she had requested delivery.

California Department of Corporations commodity expert and Corporations Counsel Jill Jablonow disagreed, arguing that delivery is mandated.

The 1990 law was enacted to make "off-exchange" futures contracts illegal for sale in California. (A futures contract is an agreement to buy or sell a certain quantity of commodity at a set price on a future date.)

"(T)here is no evidence that any investors got any metals or currencies, nor indeed that any trades were ever made on behalf of many investors," the department said in a statement.

Witness Farah Kamalmozer, who identified herself as an FSIG manager, said she had never seen documentation of actual commodity trades.

"I suspect (FSIG) was a boiler room operation and they weren't really making any purchases (for us)," said investor Singer.

Most FSIG investors bought on margin -- putting up only 5-10 percent of the contract's value.

Department prosecutors said FSIG and others ordered to stop trading had offered sophisticated sales pitches that promised profits of 40 percent to 150 percent through a network of traders operating around the clock in Hong Kong, Tokyo, Sydney, Singapore, Frankfurt, Zurich, London and Chicago. Former sales agents reported that virtually no customers ended up with profits, and if they did they were not allowed to collect them, said the statement.

Toh, according to government documents, was ordered in July 1991 to stop similar sales at a business called G/S Bullion & Forex, where he was vice president.

Other L.A. County firms ordered to stop commodity trading include Raylord Investments Ltd., H.W. International Inc., Advanced Access Inc. and related companies, all based in Alhambra; Los Angeles-based Infometric Financial Service Group; and Beverly Hills-based World Capital Investment Inc.