CFTC Charges Owner of BullionDirect with $16m Precious Metals Fraud

The US Commodity Futures Trading Commission (CFTC) today charged a ‎Texas-based commodity pool operator and his firm in a case involving the ‎operation of a fraudulent precious metals vault, according to a CFTC ‎statement.‎

Charles H. McAllister and his company BullionDirect, Inc. (BDI) were ‎accused of taking money from customers who thought they were getting gold, ‎silver, palladium, and platinum in return. ‎Customers were lulled into the false belief that precious metals ‎had been purchased and were stored in Bullion Direct’s vault, but $16 million worth of their bullions vanished over two years.

The complaint also charges McAllister with making several misleading ‎representations to actual and prospective investors. As also alleged, ‎the defendant assured the victims that they were pooling ‎their funds ‎for buying standard-sized bars of gold and ‎silver, while he was actually running a Ponzi Scheme Ponzi Scheme A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and Read this Term. ‎

An estimated 1,400 ounces of platinum and palladium ‎were also lost, according to the complaint that accuses the ‎defendants of fraud, misappropriation, registration ‎violations, and issuing false statements.‎

The CFTC added that McAllister was indicted in January 2018 on federal wire fraud ‎and Money Laundering Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term charges in connection with BDI‎’s scheme to defraud ‎customers. ‎

The U.S. derivatives regulator alleged in its complaint, filed ‎on January 23, ‎that from 2009 to 2015, the money sent to BullionDirect was not used to ‎purchase precious metals on its clients' behalf. Prosecutors said that instead ‎of buying the precious metals ordered by his customers, McAllister ‎spent the money on company expenses, investment activities ‎and for his own personal use and benefit. ‎

As a result of the actions and misappropriation, the ‎commission seeks full restitution to ‎defrauded ‎participants, disgorgement of any ill-gotten gains, a civil ‎monetary ‎penalty, permanent registration and trading ‎bans, and a permanent injunction ‎against violations of ‎federal commodities laws, as charged.‎