In CFTC Enforcement Action, Federal Court Orders Florida Resident Martin Sommers and His Company International Monetary Metals, Inc. to Pay over $9.8 Million for Engaging in Illegal, Off-Exchange Precious Metals Transactions and Registration Violations
By Commodity Futures Trading Commission ….
On August 12, 2016, the U.S. Commodity Futures Trading Commission (CFTC) announced that Judge William J. Zloch of the U.S. District Court for the Southern District of Florida granted the CFTC’s motion for entry of final default judgment against Defendants International Monetary Metals, Inc. (IMM), a Florida corporation, and its controlling person, Florida resident Martin Sommers. Judge Zloch’s Default Final Judgment (the Judgment) requires the Defendants jointly and severally to pay disgorgement totaling US$2,469,783 and a civil monetary penalty totaling $7,409,349. The Judgment also imposes permanent trading, solicitation, and registration bans against the Defendants and prohibits them from violating provisions of the Commodity Exchange Act (CEA), as charged.
The Judgment, entered on August 1, 2016, stems from a CFTC Complaint, filed on September 30, 2014, that charged IMM and Sommers with engaging in illegal, off-exchange transactions in precious metals (including gold and silver) with retail customers on a leveraged, margined, or financed basis and charged IMM with acting as a Futures Commission Merchant (FCM) without being registered with the CFTC as required.
Specifically, the Judgment finds that, from July 16, 2011 to March 31, 2013, Defendants solicited retail customers to engage in leveraged, margined, or financed precious metals (including gold and silver) transactions, and IMM received, in aggregate, $2,469,783 in commissions from 185 such customers.
In addition, the Judgment finds that IMM solicited or accepted orders for retail commodity transactions and in connection with such orders accepted funds and thus acted as an unregistered FCM.
Lastly, the Judgment finds that Sommers, as controlling person for IMM, is liable for IMM’s violations of the CEA as well as his own, and that IMM is liable as principal for the CEA violations committed by its officers, employees, and agents, including Sommers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, off-exchange leveraged, margined, or financed transactions such as those conducted by the Defendants are illegal unless they result in actual delivery of metal within 28 days. According to the Judgment, precious metals were never actually delivered to Defendants’ customers either by Defendants or by the precious metals wholesalers through which Defendants conducted their customers’ precious metals transactions, namely Worth Group Inc. (Worth) and AmeriFirst Management, LLC (AmeriFirst).
The CFTC previously brought enforcement actions against both Worth and AmeriFirst in the U.S. District Court for the Southern District of Florida. The CFTC sued Worth in August 2013, charging Worth with engaging in illegal, off-exchange precious metals transactions and other violations, and settled with Worth in February 2016. The CFTC sued AmeriFirst in July 2013, charging AmeriFirst with engaging in illegal, off-exchange precious metals transactions, fraud, and other violations. On July 24, 2014, the District Court entered a supplemental consent Order against AmeriFirst and the three individual Defendants in that case requiring them to pay more than $25 million in restitution and $10 million in civil monetary penalties.
The CFTC cautions that Orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this action are Christopher Giglio, David C. Newman, Linda Y. Peng, R. Stephen Painter, Jr., David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.
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CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.