The CFTC filed a civil injunctive enforcement action against employees of a firm for engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged basis. Under the Dodd-Frank Act, leveraged transactions such as those conducted by the firm are illegal off-exchange transactions unless they result in the actual physical delivery of metals within 28 days. The CFTC complaint alleged that metals were never actually delivered within that time period.
Among other violations, the CFTC specifically determined that the firm:
- employees collected approximately $456,977 from at least 10 customers in connection with precious metals transactions, approximately $156,783 of which was paid to the firm in the form of commissions, markups, storage fees and interest charges; and
- accepted customer orders and funds, and, therefore, acted as a Futures Commission Merchant ("FCM"), but failed to register as such with the CFTC.
The CFTC order also alleged that the firm executed its illegal precious metals transactions through a financial group that the CFTC previously had charged with illegal precious metals transactions. In its continuing litigation against the firm, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction from future violations of the CEA.
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