By Commodity Futures Trading Commission….
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Defendants Oakmont Financial, Inc. (Oakmont) of Boynton Beach, Florida, and Joseph Charles DiCrisci of New York, New York, an Oakmont owner and principal.
The CFTC Complaint charges the Defendants with engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis. The Complaint further alleges that DiCrisci managed, or controlled those who controlled, the day-to-day operations of Oakmont, and therefore, as controlling person for Oakmont, is liable for Oakmont’s violations of the Commodity Exchange Act (CEA).
According to the Complaint, from at least July 16, 2011, and continuing through at least July 27, 2012, Oakmont, by and through its employees, solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals transactions. During that period, Oakmont collected at least $2,308,228 from at least 107 customers in connection with precious metals transactions and, of this amount, received commissions and fees totaling at least $735,329. The Complaint also alleges that Oakmont accepted customer orders and funds and therefore acted as a Futures Commission Merchant (FCM), but failed to register with the CFTC as an FCM, as required.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions, such as those conducted by Oakmont, are illegal off-exchange transactions unless they result in actual delivery of metals within 28 days. The Complaint alleges that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of Oakmont’s customers.
The Complaint also alleges that Oakmont executed the illegal precious metals transactions through Hunter Wise, LLC. The CFTC filed an enforcement action against Hunter Wise on December 5, 2012, charging it and other Defendants with engaging in illegal, off-exchange precious metals transactions, and charging Hunter Wise with fraud and other violations (see CFTC Press Releases 6447-12).
On February 19, 2014, the court found, on summary judgment, that Hunter Wise had no actual metal to deliver to customers and held that Hunter Wise engaged in illegal precious metals transactions and was required to register as an FCM but did not do so and therefore violated Sections 4(a) and 4d of the CEA (see CFTC v. Hunter Wise Commodities, LLC, 1 F. Supp. 3d 1311 (S.D. Fla. 2014)). On April 15, 2014, the U.S. Court of Appeals for the Eleventh Circuit affirmed the court’s issuance of a preliminary injunction and held that the CFTC’s jurisdiction under Section 2(c)(2)(D) of the CEA extends to the precious metals transactions at issue in the case and that no exception to the CFTC’s jurisdiction applied. And, on May 16, 2014, after a bench trial on the remaining claims, including fraud, the court entered an Order finding that Hunter Wise fraudulently misrepresented the nature of precious metals transactions that resulted in millions of dollars in customer losses.
In its continuing litigation against Oakmont and DiCrisci, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution to affected customers, permanent registration and trading bans, and a permanent injunction from future violations of the CEA, as charged.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this action are: Kara Mucha, Kassra Goudarzi, Michael Solinsky, and Charles Marvine.
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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.