Coral Gables, Florida – Robert Escobio is facing charges of fraud following a civil enforcement complaint filed by the U.S. Commodity Futures Trading Commission (CFTC) on August 1, 2014, in the U.S. District Court for the Southern District of Florida. Escobio, along with Southern Trust Metals, Inc. (ST Metals) and Loreley Overseas Corp., allegedly operated a scheme that defrauded retail customers through illegal, off-exchange precious metals transactions.
According to the CFTC’s complaint, between July 16, 2011, and May 1, 2013, the defendants received over $2.6 million from at least 135 customers, who collectively lost $600,000 of their investments with ST Metals. Additionally, between February 2011 and May 2013, they solicited more than $900,000 from customers for commodity futures and options without registering with the CFTC as a Futures Commission Merchant – a violation of federal regulations.
The scheme involved soliciting customers to participate in leveraged, margined, or financed precious metals transactions. These transactions are illegal under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 unless actual delivery of the metal occurs within 28 days. The CFTC alleges that no metals were ever delivered. Instead, ST Metals engaged in over-the-counter derivative trades with two U.K.-based trading firms, using margin trading accounts in the name of Loreley.
Customers were reportedly told that ST Metals was providing loans to purchase precious metals, but the CFTC asserts that no loans were made, no metals were purchased, and the transactions were, in fact, illegal commodity transactions. The CFTC is seeking disgorgement of ill-gotten gains, restitution for customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act.
The CFTC acknowledged the assistance of the U.K. Financial Conduct Authority in this matter. The case is being pursued by Carlin Metzger, Heather Johnson, Joseph Konizeski, Scott Williamson, and Rosemary Hollinger of the CFTC’s Division of Enforcement.
Customers who believe they may have been victims of this scheme are encouraged to report suspicious activity to the CFTC via its toll-free hotline at 866-FON-CFTC (866-366-2382) or file a tip or complaint online.
Source: CFTC.gov
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