Of the $35,000 that civil engineer Richard Croy lost investing with the currency-trading firm First Lexington Group LLC, he parted with the biggest chunk of that money -- $20,000 -- in a March 2003 wire transfer.

And did so willingly. After all, Mr. Croy's previous investments with New York-based FLG had performed well, as far as he could tell from written account statements and the verbal boasts, peppered with idle chitchat, he got in regular personal calls from FLG President Joseph A. Grunfeld.

But less than a month after Mr. Croy's biggest currency-market gambit, FLG customers discovered the firm's phone had been disconnected, and Mr. Grunfeld couldn't be reached, according to court documents. The Commodity Futures Trading Commission and Federal Bureau of Investigation soon charged Mr. Grunfeld with defrauding as many as 60 investors of a total of $2 million.

Among the evidence: FBI videotapes in which Mr. Grunfeld told an undercover agent he had lost customers' money by spending it on personal items, including a $16,000 watch, and gambling at casinos. An attorney for Mr. Grunfeld, who has pleaded guilty to criminal fraud charges in FLG's meltdown, declined to comment on the matter, citing his pending sentencing.

"He had mentioned to me that he was a poker player and played in tournaments," recalls Mr. Croy, a 59-year-old Toledo, Ohio, resident. "But I didn't realize he was gambling with my money."

Mr. Croy and others like him are the unhappy denizens of a little-known corner of the foreign-exchange market where scammers seek to separate investors from their money. Small investors, drawn to foreign exchange as an alternative to the stock market and the petty yields offered by bonds, have proved to be readily available, if not willing, targets: About 23,000 investors have lost about $350 million in foreign-exchange fraud cases the CFTC has pursued since Congress in late 2000 gave the regulator authority over a small slice of the global currency market.

Court records paint a picture of tactics previously associated more closely with penny-stock "bucket shops," including high-pressure sales calls and the touting of nonexistent track records. The cases involve varying degrees of actual trading but also include Ponzi-type setups in which virtually all investor money instead is spent by scammers who never invest the money on behalf of customers. Those roped in have included numerous retirees, a chiropractor in Colorado -- and even the volunteer fire department in East Rockaway, N.Y.

Andrew Hedges, president of East Rockaway Fire Department Inc., a nonprofit fund-raising arm for the 100-member unit, says the department lost a "substantial sum" investing with a currency firm whose former secretary, court documents show, faces sentencing next month in connection with a scheme that reaped about $1.6 million from investors from late 2000 to 2003.

No more betting on currencies to pay for equipment and other expenses, Mr. Hedges says. "I guess we'll stay with safe things. We'll keep on selling our raffle tickets or whatever."

The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records -- small change for a Wall Street firm, but perhaps a big part of an average Joe's nest egg.

The currency scams are becoming more numerous, authorities say, but all start from the same place: a pitch to investors to get involved in the world's largest and probably fastest-moving market, where currencies valued at around $2 trillion change hands every day. The pitches often include fantastic promises of profits from changes in the value of the dollar, yen, euro, pound and other denominations.

Those cases have led some to ask whether the CFTC needs even greater authority over all aspects of the currency market, rather than just trades done in the U.S. via futures or options contracts, which convey the right to buy or sell an underlying currency on a fixed expiration date. Others reckon the regulator could do the most good by putting a higher priority on guarding against the systemic risk posed by Wall Street banks and other large participants.

More than 95 percent of foreign-exchange trading consists of deals privately negotiated over the phone or via computer networks, often between trading desks at deep-pocket institutions such as investment banks and hedge funds. These trades often are done on a cash basis and may span various governments' jurisdictions. They are lightly regulated.

The slim supervision is attractive to scammers, many of whom claim they can help customers cash in on the dollar's fluctuations. By avoiding dealings on the Chicago Mercantile Exchange and other established futures and options arenas, fraudsters can evade the CFTC's reach.

As its name suggests, the CFTC was founded to oversee trading in agricultural contracts, but as once commodity-based markets such as the Merc began listing products pegged to financial instruments such as currencies, the commission enforced its rules in those areas as well.

As part of a periodic re-examination of the CFTC's charter in 2000, Congress expanded the agency's power to go after deals that merely resembled futures trading -- even if the trades took place away from a regulated exchange. To a certain extent, lawyers at the CFTC and at trading firms say they still are wrangling with the implications of that provision.

And not entirely successfully. In the CFTC's lone, recent defeat on a currency-trading enforcement, federal appeals Judge Frank Easterbrook upheld the dismissal of a lawsuit in Chicago against Michael Zelener and British Capital Group, accused of defrauding customers of as much as $4 million. In his June 2004 decision, Judge Easterbrook affirmed a lower-court ruling that Mr. Zelener's business practices were questionable, but didn't fit the definition of futures trading and thus stood outside the CFTC's jurisdiction.

CFTC commissioners and other futures-industry veterans say the case highlighted a loophole that Congress should close when it again revisits the CFTC's charter this fall. One CFTC staffer referred to the Zelener case as a "road map" for companies trying to evade regulation.