There were ups and downs along the way, but that's the nature of the game. Foreign currency is a volatile, speculative arena that fluctuates so fast it makes the Dow Jones Industrials look dowdy by comparison. Market movement is measured in hundredths of a cent, called "pips." The idea is to buy one currency with another -- Japanese yen with American dollars for example -- in the hope that changes in the exchange rate will make the money you bought increase in value relative to the money you sold.
And it was easy. All Christensen had to do was follow his trader's advice, and the money seemed to pile up.
Though he'd dabbled in investing, Christensen had never played the foreign exchange markets prior to getting a cold call from International Currency Management in Hollywood. He knew nothing about the Interbank market, a network of banks and financial institutions that sell currency to one another 24 hours a day, around the world. Estimates put the value of Interbank trading at $1.5 trillion daily. But unlike the New York Futures Exchange or the Chicago Mercantile Exchange, it has no physical manifestation, no trading floor. It is a virtual market that moves money in multimillion-dollar chunks. Traditional thinking has it that the Interbank is no place for the small, inexperienced player. The Internet has helped level the playing field, however. Now anyone with a computer and a modem can get access to exchange rates, find individual investors who chalked up astronomical returns, locate a trader, or chat endlessly about the nuances of the Interbank.
Currency is forever in flux, so there's big money to be made on a daily basis. It's risky, but a smart trader can minimize that risk by placing "stop losses" to pull a trade out of the market automatically when it starts going bad. At least that's how an ICM trader sold it, says Christensen.
But he wasn't buying, at first. "I was very reluctant," says the 53-year-old self-employed mason from Boise, Idaho, who spends much of his free time traveling the country giving self-improvement talks. "I told him I wasn't interested. He called back a second and third time."
On each call the ICM trader would tell Christensen, "You'd be a wealthy man if you'd gotten in on this trade," or something very close to that. It was a smooth and convincing spiel, and it soon paid off. A few days after the first call, Christensen cut a check for $10,000 to open his ICM account.
His luck ran cold those first few trades, and the $10,000 quickly evaporated. Christensen's trader recommended a more aggressive strategy with a different ICM trader. Eager to work his way back to the break-even point, he cut another check for $10,000.
Lady luck smiled. His trading went well, his profits were mounting. On paper. But when he tried to cash out, Christensen got a big surprise. ICM president and CEO Howard Needle told Christensen he owed the trading firm money. Worse, he would have to pay that money before he could get his profits, a statement only slightly less ludicrous than it sounds.
Christensen was leveraging trades, meaning his account controlled more in foreign currency than it was actually worth. The ratio was 4 percent, so that every $4000 Christensen put into his account controlled $100,000 worth of whatever currency he happened to be trading. Leveraging is advantageous if the market is in your favor, because the more money you control, the more you stand to make. But if the market's against you, it's possible to lose all your investment and go into the hole besides. Needle told Christensen that, unbeknownst to him, ICM had covered his previous losses, and even though he was now in the black, he still owed the company money.
That didn't sit well with Christensen, who says the only account tally he ever had was the one he kept himself. "I was going along, and through the whole period no one could tell me what my balance was," he says. "Big red flag there." And there were others: His account was pooled with other investors' money instead of being held separately as he was assured it would be, and the foreign-currency prices ICM gave him didn't match those he found through his own research.
Not one to fret long-distance, Christensen got on a plane in Boise and flew to South Florida in May 1998. He showed up at ICM's office, 3900 Hollywood Blvd., early the next morning before the receptionist got to work, and let himself into the back room. He expected the hushed, muted environment of a bank. Instead he found "a boiler room."