Commodities Futures Trading Commission

Defendants Ordered to Comply with the Law of the Eleventh Circuit for all Financed Transactions and Show Delivery of Physical Metal to the Customer or the Customer’s Depository Results within 28 Days

By Commodity Futures Trading Commission….
 

Andrew_WilshireOn Thursday, February 4, the U.S. Commodity Futures Trading Commission (CFTC) announced today that the U.S. District Court for the Southern District of Florida entered a Consent Order of Permanent Injunction against Defendants Worth Group Inc. (Worth) of Jupiter, Florida, and its owner and operator, Andrew Wilshire of Jupiter, Florida (Photo right), and Wilshire’s sister, Eugenia Mildner also of Jupiter, Florida, who served as Worth’s sole officer and director prior to February 2012. The Order requires the three Defendants to immediately comply with the law governing their financed precious metals transactions and to pay restitution of $1,250,000. Defendants Worth and Wilshire are also required to pay a civil monetary penalty $1,250,000.

The Court’s Order stems from the CFTC Complaint filed on August 13, 2013, that charged Defendants with defrauding retail precious metals customers and engaging in illegal, off-exchange retail commodity transactions. According to the CFTC Complaint, Worth sells physical precious metals – specifically gold, silver, platinum and palladium – to individual retail customers throughout the United States on both a financed basis (financed transactions), in which customers pay a portion of the purchase price and finance the remainder through loans from Worth, and on a fully-paid basis (fully-paid transactions), in which customers pay the full purchase price for precious metals. In all financed transactions, it is Worth’s obligation to deliver precious metals to its customers within 28 days.

For fully-paid transactions, the Complaint charged that Defendants falsely represented that Worth would purchase and store precious metals, when in fact Worth merely covered its obligations through unallocated spot forward contracts with third parties. For financed transactions, the Complaint charged Defendants with engaging in illegal and fraudulent off-exchange transactions, in that Worth failed to timely deliver precious metals for a significant percentage of financed transactions, yet charged interest and storage fees when no metal had been purchased.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, financed precious metals transactions must be conducted on an exchange, unless the entity offering the transactions – such as Worth – can establish that actual delivery of physical metal results within 28 days. As one federal court of appeals recognized in connection with another precious metals fraud case brought by the CFTC, “actual delivery” requires a transfer of “possession and control” and giving “real and immediate possession to the buyer or the buyer’s agent.” CFTC v. Hunter Wise Commodities LLC, 749 F.3d 967, 978-79 (11th Cir. 2014).

The Court’s Order requires Defendants to immediately bring Worth, as well as any subsidiary, successor, affiliate, or related entity, into compliance with the requirement for actual delivery as articulated in Hunter Wise. Specifically, Defendants must be able to show that each off-exchange financed transaction results in actual delivery to the customer or the customer’s depository results within 28 days as required by Section 2(c)(2)(D)(ii)(III)(aa) of the Commodity Exchange Act (CEA). In addition, the Order also prohibits Defendants from further violations of the CEA, as charged, and imposes permanent trading, solicitation, and registration bans against all of the Defendants.

The Court’s Order also provides that the National Futures Association is responsible for collecting restitution and making any distributions to Worth’s customers.

The CFTC thanks the U.K. Financial Conduct Authority for its assistance in this matter.

The CFTC Division of Enforcement staff members responsible for this action are Melissa Cavers, David Chu, Elizabeth N. Pendleton, Brigitte Weyls, Scott Williamson, and Rosemary Hollinger, as well as William P. Janulis and former Enforcement staff Theodore Z. Polley.

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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.
 

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