CFTC Charges Metal Dealers in $185 Million Fraudulent SchemeSeptember 25, 2020
The Commodity Futures Trading Commission joined 30 states regulators in bringing up charges against precious metals dealers that solicited $185 million from 1,600 seniors and other vulnerable investors. This scheme has grown at an unprecedented pace, with nearly a dozen companies and their principals charged by the CFTC.
The defendants in the fraud case were identified as California-based companies TMTE Inc., which also operated under the brand names Metals.com, Chase Metals Inc., Chase Metals LLC, Barrick Capital Inc., along with their operatives Simon Batashvili, Lucas Asher, and Tower Equity LLC.
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The CFTC alleges that beginning in September 2017 to the present, the metal dealers touted precious metals at grossly inflated prices that were not disclosed. The overcharges averaged from 100 percent to more than 300 percent over the prevailing market price. The defendants didn’t disclose the markup they charged investors for their precious metals products.
In the end, nearly all buyers lost the majority of their funds immediately upon completing a transaction. The defendants used cold calling, television, radio, and social media advertisements to entice victims to liquidate their previous investment with regulated firms. They were preying on seniors and other vulnerable persons, misrepresenting the value and potential profit from the metal products they were selling and scamming consumers out of their retirement savings.
In most cases, the market value of the precious metals sold to them was substantially lower than the value of the holdings investors had liquidated to fund their bullion purchase.
Regulator seeks to return money to victims
As the complaint alleges, when questioned by customers about the value of the precious metals bullion they purchased, the defendants “falsely claimed that the precious metals bullion were rare and carried a premium far above the base melt value. In fact, the precious metals bullion were significantly less valuable than the defendants claimed.”
The statement further states that the fraudsters attempted to evade regulatory actions from certain states by changing their business name and affiliated companies in order to mask their actual identities.
The multi-state complaint seeks to force the defendants to stop defrauding investors going forward, reimburse investors, pay a fine and be banned from trading in commodities. The court has also appointed a receiver to take over the companies to marshal funds for the benefit of investors across the country.
Although the derivatives regulator has jurisdiction over only swaps and commodity futures contracts, the CFTC has historically also had enforcement authority on the spot or physical markets.
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