CFTC and Thirty States Bring Precious Metals Fraud Action

The CFTC and thirty states jointly filed a civil enforcement action for fraud against a precious metals firm and its principals. The CFTC noted that this action is the "largest joint filing in CFTC history with state regulators" and the first enforcement action resulting from the CFTC's and NASAA's 2018 information sharing agreement (see previous coverage).

The Complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that the defendants received over $185 million in customer funds, the majority in retirement savings, supposedly for the purpose of buying precious metals. The defendants allegedly deceived elderly persons with minimal experience in precious metals into purchasing the bullion at substantially inflated prices. The Complaint stated that nearly all of the defendants' customers lost the majority of the money they had invested.

In addition, the court (i) entered a restraining order freezing the assets of the defendants and allowing the CFTC and the states to examine all relevant records and (ii) appointed a receiver to seize control of the defendants' companies and assets. In the Complaint, the CFTC and the states seek (i) disgorgement of ill-gotten gains, (ii) civil money penalties, (iii) restitution, (iv) permanent registration and trading bans, and (v) a permanent injunction against further violations.