Miami, FL – December 5, 2012 – The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil enforcement action against Harold Edward Martin Jr., and a dozen affiliated companies and individuals, alleging a $46 million fraud involving the sale of nonexistent precious metals. The case, filed in the U.S. District Court for the Southern District of Florida, accuses the defendants of fraudulently marketing illegal, off-exchange retail commodity contracts.
The CFTC alleges that Hunter Wise Commodities, LLC, spearheaded the scheme, taking in at least $46 million from customers since July 2011. The defendants purportedly sold physical metals – gold, silver, platinum, palladium, and copper – to retail customers, requiring a 25% down payment and promising to arrange financing for the remainder. Customers were led to believe their metals would be securely stored.
However, the complaint claims these assurances were false. The CFTC asserts the defendants never purchased any physical metals, secured loans, or arranged for storage. Instead, the transactions were allegedly entirely paper-based. Customers were charged storage and insurance fees for metals that didn’t exist and were assessed interest on loans that were never provided.
The scheme violated provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which expanded the CFTC’s authority over these types of transactions and mandated they be conducted on regulated exchanges. The defendants’ actions occurred after the July 16, 2011, effective date of these regulations.
“Here is a prime example of how the Dodd-Frank Act provided the Commission with additional strong authority to go after wrong-doers,” stated David Meister, the CFTC’s Director of Enforcement. “Individuals who prey on people looking to make retail investments in commodities like gold and silver will be pursued.”
The CFTC previously issued a Consumer Fraud Advisory in January 2012 warning of increasing precious metals fraud schemes. The agency cautioned consumers to be wary of companies that may not actually purchase the metals they offer.
In addition to Harold Edward Martin Jr., the complaint names Fred Jager, James Burbage, Frank Gaudino, Baris Keser, Chadewick Hopkins, John King, and David A. Moore, along with several corporate entities. The CFTC is seeking injunctive relief, disgorgement of ill-gotten gains, and civil penalties against all defendants.
Source: CFTC.gov
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