A federal judge entered an Order of Default Judgment ("Order") against a firm and its president ("defendants") for entering into illegal off-exchange transactions in precious metals, and for acting as an unregistered futures commission merchant ("FCM"). The Order was in response to a Complaint filed in 2016 by the CFTC.
The Order detailed that the defendants solicited investments from retail customers for financed precious metals transactions. Customers would enter into agreements and provide a portion of the cost for purchasing precious metals, after which a third-party would arrange a loan for the remaining balance. The purchased metals were never actually delivered. Under the CEA, such transactions must be either traded on an exchange or delivered within 28 days (see CEA Sections 4(a) and 2(c)(2)(D)(ii)(III)).
Additionally, the judge found that the defendants violated CEA Section 4d(a) by accepting orders for retail commodity transactions even though the firm was not registered with the CFTC as an FCM.
The Order required the defendants to pay approximately $500,000 in disgorgement and penalties, and imposed permanent futures trading and registration restrictions.
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