By Commodity Futures Trading Commission….
The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Defendants North American Asset Management, LLC (NAAM) of Fort Lauderdale, Florida; its owner and president Alexi Bethel of Miami, Florida; and its owner and managing director Steven Labadie of Lake Worth, Florida. 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 Bethel and Labadie, as controlling persons for NAAM, are liable for NAAM’s violations of the Commodity Exchange Act (CEA).
According to the CFTC Complaint, from at least March 2012, and continuing through at least March 2013, NAAM, by and through its employees, including Bethel and Labadie, solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals transactions. During that period, NAAM collected US$2,565,272 from at least 66 of its customers with precious metals transactions and of this amount received commissions and fees totaling $648,759.60. The Complaint also alleges that NAAM 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 NAAM, 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 NAAM’s customers.
The Complaint also alleges that NAAM executed the illegal precious metals transactions through Hunter Wise Commodities, LLC (Hunter Wise), Lloyds Commodities, LLC (Lloyds), and AmeriFirst Management, LLC (AmeriFirst). The CFTC filed an enforcement action against Hunter Wise and Lloyds in December 2012, and an enforcement action against AmeriFirst in July 2013, charging them and other Defendants with engaging in illegal, off-exchange precious metals transactions, and charging Hunter Wise and AmeriFirst with fraud and other violations.
On September 18, 2013, the court entered a consent Order resolving the CFTC’s claims against AmeriFirst, finding it liable for illegal off-exchange precious metals transactions and fraud.
On February 5, 2014, in a consent Order resolving the CFTC’s claims against Lloyds, the court ordered Lloyds to pay over $5 million in restitution and penalties.
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 NAAM, Bethel, and Labadie, 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 Jeffrey Le Riche, Jennifer J. Chapin, James M. Humphrey IV, Stephen Turley, Elsie Robinson, and Charles Marvine.
* * * * * *
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.