Federal Court Orders California-Based Precious Metals Company, CEO, Senior Salesperson to Pay Over $56 Million for Fraud in Connection with Precious Metals Sales

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Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC) | Commodity Futures Trading Commission (CFTC)

Federal Court Orders California-Based Precious Metals Company, CEO, Senior Salesperson to Pay Over $56 Million for Fraud in Connection with Precious Metals Sales

A federal court has ordered a California-based precious metals company, its CEO, and a senior salesperson to pay over $56 million for fraud in connection with precious metals sales. The order, entered by Judge R. Gary Klausner of the U.S. District Court for the Central District of California, requires the defendants to pay restitution, disgorgement, and civil monetary penalties totaling $56.35 million.

According to the Commodity Futures Trading Commission (CFTC), the defendants engaged in a fraudulent scheme from November 2019 to June 2022, convincing at least 950 people to pay over $69 million for silver and gold Canadian Red-Tailed Hawk coins worth only $30 million. The defendants were found to have imposed mark-ups of between 91.89% and 129.97% on the coins, misleading customers about the actual value of the products.

Director of Enforcement Ian McGinley stated, "The defendants preyed upon elderly victims to liquidate their retirement savings to invest in a precious metals scam." The CFTC, along with state partners in California and Hawaii, took action to hold the defendants accountable for their fraudulent activities.

The court order also prohibits the defendants from further violations of the Commodity Exchange Act and imposes trading and registration bans. Additionally, CEO Kelly, who controlled the company's operations, was held responsible for the actions of its agents, including senior salesperson Spencer.

The CFTC's Division of Enforcement staff involved in the case worked diligently to bring about this resolution. The CFTC advises customers to be cautious of fraudulent schemes and encourages them to report any suspicious activities related to commodity trading laws.

The CFTC has issued a Precious Metals Fraud Advisory to help customers recognize and avoid precious metals scams. The public is urged to verify a company's registration with the CFTC before investing funds and to report any potential violations to the Division of Enforcement. Whistleblowers may be eligible for monetary rewards for reporting violations of the Commodity Exchange Act.