U.S. Court Fines and Bans Firm for Illegal Off-Exchange Metals Trades

The U.S. Commodity Futures Trading Commission (CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term) today announced that a federal court in Florida issued a consent order against Inter-Global Currency & Precious Metals, LLC (IGCPM) and its owner, manager, and controller Stavros Papastavrou.

The order assesses a civil monetary penalty of $100,000 as well as a restitution award of $447,342, and permanently bans IGCPM and Papastavrou from registering, trading, soliciting, and engaging in other CFTC-regulated activities.

According to the ruling, since August 2011 at most and continuing through May 2013 at least, IGCPM solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals (including gold, silver, platinum, and palladium) transactions. During that period, the CFTC reports that IGCPM’s customers paid the company at least $1 million related to precious metals transactions, and that it received commissions and fees totaling at least $447,342 in connection with these transactions.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions such as those conducted by IGCPM, are illegal off-Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term transactions unless they result in actual delivery of metal within 28 days. The court determined that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of IGCPM’s customers.

The court further found that IGCPM executed the illegal precious metals transactions through Lloyds Commodities, LLC (Lloyds), Hunter Wise, LLC (Hunter Wise) and AmeriFirst Management LLC (AmeriFirst). The CFTC filed enforcement actions against, among others, Lloyds and Hunter Wise in December 2012 and AmeriFirst in July 2013, charging each with engaging in illegal, off-exchange precious metals transactions, and charging AmeriFirst and Hunter Wise with fraud and other violations.

On September 18, 2013, the court entered a consent order resolving the CFTC’s claims against AmeriFirst, finding it liable for illegal, off-exchange precious metals transactions and fraud. On February 5, 2014, in a consent order resolving the Commission’s claims against Lloyds, the court ordered Lloyds Commodities to pay over $5 million in restitution and penalties.

On February 19, 2014, the court found that Hunter Wise had no actual metal to deliver to customers and held that it was engaged in illegal precious metals transactions and was required to register as a futures commission merchant but did not do so. On May 16, 2014, after a bench trial on the remaining claims including fraud, the court entered an order finding that Hunter Wise fraudulently misrepresented the nature of precious metals transactions that resulted in millions of dollars in customer losses.

In its announcement today, the CFTC cautions victims that restitution orders may not result in the recovery of money lost as the wrongdoers may not have sufficient funds or assets. The CFTC says it will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.