Miami resident Robert Escobio and his companies, Southern Trust Metals, Inc. and Loreley Overseas Corporation, have been permanently banned from commodity trading and ordered to pay over $1.7 million in restitution and penalties following a CFTC enforcement action. The judgment, issued by U.S. District Judge James Lawrence King of the Southern District of Florida on August 29, 2016, concludes a two-year legal battle and a three-day trial held in July.
The CFTC alleged a fraudulent precious metals scheme targeting retail investors. Escobio and his companies lured customers with promises of physical precious metals held in London or Hong Kong depositories. However, the court found that no physical metals were ever purchased, nor were any loans arranged as advertised. Instead, customer funds were transferred through Loreley, a British Virgin Islands company, and used for margined derivatives trading in the United Kingdom.
The court determined that 78 customers suffered losses totaling $1,543,892 due to the scheme. Judge King described the Defendants’ actions as “egregious” and ordered restitution of $1,543,892, along with a civil penalty of $254,919.66 for the precious metals fraud. An additional $559,725 in restitution and a $120,112.33 penalty were levied for operating an unregistered futures scheme.
Escobio testified that he believed he was selling physical precious metals, but Judge King found his testimony “incredible.” The court also dismissed the Defendants’ claim that market fluctuations caused the customer losses, stating that those who fraudulently induce transactions cannot blame market conditions for resulting losses.
The judgment builds upon a partial summary judgment granted in April 2016, which found the Defendants violated the Commodity Exchange Act by conducting illegal off-exchange commodity transactions and failing to register as a Futures Commission Merchant. The court ruled that the leveraged precious metals transactions should have been conducted on a regulated exchange.
“Protecting consumers from fraud and ensuring market integrity are core components of the CFTC’s mission,” said Aitan Goelman, Director of the CFTC’s Division of Enforcement. “This case is another demonstration that the CFTC will be relentless in fulfilling its mission, including successfully prosecuting cases through trial where necessary.”
Source: CFTC.gov
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