BOCA RATON, FL – Lawrence Scott Spain, owner and manager of Palm Beach Capital LLC (PBC), is facing charges of precious metals fraud following a civil injunctive enforcement action filed by the U.S. Commodity Futures Trading Commission (CFTC) in the U.S. District Court for the Southern District of Florida on May 15, 2014.
The CFTC alleges that Spain and PBC engaged in illegal, off-exchange transactions in precious metals – including gold, silver, platinum, and palladium – with retail customers on a leveraged, margined, or financed basis. The scheme, which ran from at least July 16, 2011, through August 2012, involved soliciting customers via telephone and PBC’s website.
Approximately 39 customers reportedly invested at least $1.35 million with PBC. The CFTC claims these customers lost at least $1.25 million due to trading losses, commissions, fees, and other charges levied by PBC and associated companies. PBC allegedly retained at least $526,000 in commissions and fees from these transactions.
The transactions violated the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which prohibits leveraged, margined, or financed transactions unless actual delivery of the metal occurs within 28 days. The CFTC asserts that no actual delivery of metal ever took place for PBC’s customers.
PBC allegedly executed the fraudulent transactions through Lloyds Commodities, LLC and Hunter Wise, LLC. The CFTC previously filed enforcement actions against both entities in December 2012. Lloyds Commodities was ordered to pay over $5 million in restitution and penalties in February 2014. A bench trial against Hunter Wise on remaining charges, including fraud, concluded on March 3, 2014, with a final judgment pending as of the date of this report.
Spain is charged with being a controlling person responsible for PBC’s violations of the Commodity Exchange Act (CEA). The CFTC is seeking injunctive relief and civil penalties against Spain and PBC.
Source: CFTC.gov
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