CALIFORNIA MAN CHARGED BY CFTC WITH FRAUD RELATED TO PRECIOUS METALS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

September 11, 2015

CFTC Charges California Resident Hannes Tulving, Jr., through his company, The Tulving Company, Inc., with Misappropriation and Fraudulent Solicitation in a $17.8 Million Precious Metals Scheme

At Least 381 Customers Nationwide Allegedly Defrauded in the Scheme

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil Complaint against Defendants Hannes Tulving, Jr. of Newport Beach, California, and his company, The Tulving Company, Inc., charging them with fraudulent solicitation and misappropriation in connection with the precious metals markets. Neither Defendant has ever been registered with the CFTC.

In its enforcement action, the CFTC alleges that the Defendants fraudulently offered contracts of sale of commodities in interstate commerce, namely, contracts for the sale of gold, silver, platinum, and palladium bullion and coin (precious metals). In offering these contracts, the Defendants obtained and misappropriated at least $17.8 million from at least 381 customers located throughout the United States for the purchase and sale of precious metals, according to the Complaint.

In their solicitations, the Defendants allegedly made false and fraudulent representations, including that The Tulving Company was a highly reputable, stable, and established precious metals firm that delivered precious metals to customers; that it bought and sold in excess of $2.1 billion in precious metals from 1999 through March 2013; and that precious metals were shipped quickly to customers after placement of orders and receipt of customer funds. These representations were false, according to the Complaint.

The Defendants allegedly purchased and sold little or no precious metals with the funds they collected from customers. Instead, according to the Complaint, the Defendants defrauded customers by lying to them and misappropriating their funds for improper and unauthorized uses, including for the Defendants’ own financial benefit.

To conceal their fraud, according to the Complaint, the Defendants made false and/or deceptive statements, including falsely representing that (1) customers owned specific amounts of precious metals when, in fact, they did not, (2) customers holdings in precious metals had significant value when, in fact, the non-existent holdings had no value whatsoever, and (3) customers were realizing profits from their investments when, in fact, no profit whatsoever had been realized.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.

CFTC Division of Enforcement staff members responsible for this case are Luke B. Marsh, Richard Foelber, Dmitriy Vilensky, and Paul G. Hayeck.

CFTC ORDERS ORDERS PRECIOUS METALS TRADING COMPAMY AND OWNERS TO PAY $2.9 MILLION

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Orders S.J. Woods, Inc., Peter Blanco, and Paul Proscia to Pay over $2.9 Million in Restitution and Permanently Bars Them from the Commodities Industry

Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) issued an Order filing and settling charges against S.J. Woods, Inc. (SJW) and its owners, Peter Blanco and Paul Proscia (together Respondents), involving their participation in illegal, off-exchange financed transactions in precious metals with retail customers. The Order requires Respondents jointly to pay restitution totaling $2,971,992.23 to their customers, imposes permanent trading bans against them, and prohibits them from violating the Commodity Exchange Act, as charged. SJW’s principal place of business is Holbrook, New York. Blanco is a resident of Brightwaters, New York, and Proscia is a resident of Sayville, New York.

The Illegal Transactions

The CFTC Order finds that from July 2011 through February 2013, Respondents solicited retail customers, generally by telephone, to buy and sell physical precious metals, such as gold and silver, in off-exchange, leveraged transactions. According to the Order, customers paid as little as 25 percent of the purchase price for the metals, and Respondents purportedly financed the remainder of the purchase price, while charging customers interest on the amount borrowed.

The CFTC Order states that financed, off-exchange transactions with retail customers have been illegal since July 16, 2011, when certain amendments of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 became effective. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by Respondents must be executed on, or subject to, the rules of a CFTC-approved board of trade. Since Respondents’ transactions were done off-exchange, with customers who were not eligible contract participants, they were illegal, the Order finds.

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 and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this matter are Boaz Green, Kara Mucha, James H. Holl, III, and Rick Glaser.

COMPANY, OWNERS CHARGED IN OFF-EXCHANGE FINANCED TRANSACTIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Charges Florida-Based Vertical Integration Group LLC and Its Owners, Richard V. Morello and Junior Alexis, with Engaging in Illegal, Off-exchange Commodity Transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Vertical Integration Group LLC (Vertical) of Lake Worth, Florida, its owner, Richard V. Morello of Lake Worth, Florida, and Junior Alexis of Boynton Beach, Florida. The CFTC Complaint charges the Defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers.

The CFTC Complaint alleges that from July 16, 2011, and continuing through at least February 2013, the Defendants solicited retail customers to buy physical precious metals in off-exchange leveraged transactions. Specifically, the CFTC alleges that customers paid Vertical a portion of the purchase price for the metals, and Vertical financed the remainder of the purchase price, while charging the customers interest on the amount purportedly loaned to customers.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), a financed transaction such as those conducted by Vertical is an illegal off-exchange transaction unless it results in actual delivery of metal within 28 days. The CFTC Complaint alleges that with regard to the financed transactions, Vertical’s customers never took delivery of the precious metals they purportedly purchased.

The CFTC further alleges that when Vertical engaged in these illegal transactions they were acting as a dealer for metals merchant Hunter Wise Commodities, LLC (Hunter Wise), whom the CFTC charged with fraud and other violations in federal court in Florida on December 5, 2012 (see CFTC Press Release 6447-12). As alleged in the CFTC Complaint against Hunter Wise and in the Complaint in this case, neither Vertical, nor Hunter Wise actually purchased or held metal on the customers’ behalf.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged.

The CFTC Division of Enforcement staff responsible for this action are Michelle Bougas, Alan I. Edelman, Alison Wilson, Michael Solinsky, Charles Marvine, and Gretchen L. Lowe.

TWO COMPANIES AND OWNERS ORDERDED BY CFTC TO PAY OVER $1MILLION IN RESTITUTION AND PENALTIES IN PRECIOUS METALS FRAUD CASE

FROM: COMMODITY FUTURES TRADING COMMISSION

CFTC Orders Florida Firms, Joseph Glenn Commodities LLC and JGCF LLC, and Owners Scott Newcom and Anthony Pulieri to Pay over $1 Million in Restitution and Penalties for Fraudulent Off-Exchange Transactions in Precious Metals with Retail Customers

Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against two Boca Raton, Fla., companies, Joseph Glenn Commodities LLC (Joseph Glenn) and JGCF LLC (JGCF), and their sole owners and principals, Scott Newcom and Anthony Pulieri (the Respondents) for engaging in illegal, fraudulent off-exchange financed transactions in precious metals with retail customers.

The CFTC Order, filed on March 27, 2013, requires Joseph Glenn, JGCF, Newcom, and Pulieri to pay approximately $635,000 in restitution to customers for their losses and to return approximately $330,000 remaining in customers’ accounts. The Order requires Pulieri to pay a civil monetary penalty of $100,000. The Order also permanently prohibits the Respondents from registering with the CFTC and imposes a five-year trading ban on trading for others. In addition, the Order prohibits the Respondents from violating the Commodity Exchange Act, as charged, and requires them to comply with certain undertakings, including fully and expeditiously cooperating with the CFTC.

The Illegal and Fraudulent Transactions

The CFTC Order finds that from July 2011 through June 2012, the Respondents solicited retail customers, generally by telephone or through Joseph Glenn’s website, to buy physical precious metals such as gold, silver, copper, platinum, or palladium in what are known as off-exchange leverage transactions. According to the Order, the customers paid the Respondents a portion of the purchase price for the metals, and Joseph Glenn and JGCF purportedly financed the remainder of the purchase price, while charging the customers interest on the amount they purportedly loaned to customers.

The CFTC Order states that such financed off-exchange transactions with retail customers have been illegal since July 16, 2011, when certain amendments of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 (Dodd-Frank Act) became effective. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by the Respondents must be executed on, or subject to, the rules of an exchange approved by the CFTC. Since the Respondents’ transactions were done off-exchange with retail customers, they were illegal.

Furthermore, the CFTC Order states that when Joseph Glenn and JGCF engaged in these illegal transactions they were acting as dealers for a metals merchant called Hunter Wise Commodities, LLC (Hunter Wise), which the CFTC charged with fraud and other violations in federal court in Florida on December 5, 2012 (see CFTC Press Release 6447-12). Hunter Wise was purportedly Joseph Glenn’s and JGCF’s source for the metal and the loans. As alleged in the CFTC Complaint against Hunter Wise and according to the CFTC Order in this case, however, neither Joseph Glenn, JGCF, nor Hunter Wise purchased or held metal on the customers’ behalf, or disbursed any funds to finance the remaining balance of the purchase price. The Order finds that the Respondents’ customers thus never owned, possessed, or received title to the physical commodities that they believed they purchased.

The Order also finds that the Respondents defrauded their customers by misrepresenting the profitability of the financed off-exchange transactions and failing to disclose associated commissions, service, and interest fees.

CFTC staff responsible for this matter are Jon J. Kramer, Joy H. McCormack, Elizabeth M. Streit, Scott R. Williamson, Rosemary Hollinger, and Richard Wagner.

INJUNCTIONS ENTERED IN PRECIOUS METALS COMMODITY FRAUD SCHEME CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION

Federal Court in Florida Enters Preliminary Injunction Order against Hunter Wise Commodities, LLC, Lloyds Commodities, LLC, and 18 Other Defendants in Connection with Operating a Multi-Million Dollar Fraudulent Precious Metals Scheme

Finding that new Dodd-Frank anti-fraud authority applies, Court freezes defendants’ assets and appoints special corporate monitor for corporate defendants

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that the Honorable Donald M. Middlebrooks of the U.S. District Court for the Southern District of Florida entered a Preliminary Injunction Order against Defendants Hunter Wise Commodities, LLC; Hunter Wise Services, LLC; Hunter Wise Credit, LLC; Hunter Wise Trading, LLC; Lloyds Commodities, LLC; Lloyds Commodities Credit Company, LLC; Lloyds Services, LLC; C.D. Hopkins Financial, LLC; Hard Asset Lending Group, LLC; Blackstone Metals Group, LLC; Newbridge Alliance, Inc.; United States Capital Trust, LLC; Harold Edward Martin, Jr.; Fred Jager; James Burbage; Frank Gaudino; Baris Keser; Chadewick Hopkins; John King; and David A. Moore that prohibits the Defendants from offering investments in physical metals to the retail public.

The Court’s decision stems from the CFTC’s December 5, 2012 Complaint charging the Defendants with fraudulently soliciting and accepting at least $46 million from hundreds of customers since July 2011 to invest in physical precious metals, such as gold, silver, platinum, palladium, and copper. (See CFTC Press Release 6447-12, December 5, 2012). According to the CFTC Complaint, the Defendants claimed to sell physical metals to customers who made a down payment on the amount of physical metals they wished to buy, usually 25 percent of the total purchase price. Defendants allegedly claimed to arrange loans for the balance of the purchase price, and advised customers that their physical metals would be stored in a secure depository. The Complaint alleges that these statements were false because the Defendants did not own, purchase or store any metal for their customers, and that the Defendants cheated and defrauded customers by charging customers interest on loans which were never made, and storage and insurance fees on metals that did not exist. In addition, the Complaint alleges that the offering of these investments in physical metals constituted illegal, off-exchange retail commodity contracts in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).

Following a hearing on February 22, 2013, Judge Middlebrooks found that the CFTC had shown a likelihood of success in proving the allegations of the Complaint. In the Court’s Order issued on February 25, Judge Middlebrooks described Hunter Wise as "the conductor of th[e] orchestra, with the other Defendants playing instruments at Hunter Wise’s direction." According to the Order, Hunter Wise provided reports to customers that were misleading because they created the "illusion that actual commodities are being transferred into or out of their accounts, when in reality, no real metals are being transferred as a result of the transaction." According to the Order, "Hunter Wise does not actually buy, sell, loan, store, or transfer physical metals in connection with these retail commodity transactions. Instead, Hunter Wise records and tracks customer orders and trading positions, and then manages its exposure to these retail customer trading positions by using the customer’s funds to trade derivatives – such as futures, forwards and rolling spot contracts – in its own margin trading accounts."

The Court’s Order prohibits the Defendants from trading, soliciting orders, committing fraud or engaging in business activity related to contracts or transactions regulated by the CFTC. In its continuing litigation against the Defendants, the CFTC is seeking a permanent civil injunction, in addition to other remedial relief, including restitution to customers.

The Court’s Order also froze all the defendants’ assets, and appointed Melanie Damian, Esq. as Special Corporate Monitor to assume control over the corporate defendants. The CFTC has established a website that will be updated periodically with information about the ongoing proceedings and has other relevant information for consumers and other victims, http://www.cftc.gov/ConsumerProtection/CaseStatusReports/hunterwise.

The Dodd-Frank Act expanded the CFTC’s jurisdiction over transactions in physical metals, like these, and requires that such transactions be executed on or subject to the rules of a board of trade, exchange or commodity market, according to the Complaint. This new requirement took effect on July 16, 2011. The Complaint alleges that all of the Defendants’ financed commodity transactions after July 16, 2011, were illegal. The Complaint also alleges that the Defendants defrauded customers in all of these financed commodity transactions.

In January 2012 the CFTC issued a Consumer Fraud Advisory regarding precious metals fraud, saying that it had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Consumer Fraud Advisory specifically warned that frequently companies do not purchase any physical metals for the customer, instead simply keep the customer’s funds. The Consumer Fraud Advisory further cautioned consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.

The CFTC thanks the Florida Office of Financial Regulation, the Florida Department of Agriculture and Consumer Services, and the United Kingdom Financial Services Authority for their assistance in this matter.

The CFTC Division of Enforcement staff responsible for this action are Carlin Metzger, Heather Johnson, Joseph Konizeski, Jeff LeRiche, Peter Riggs, Jennifer Chapin, Steven Turley, Brigitte Weyls, Joseph Patrick, Susan Gradman, Thaddeus Glotfelty, William Janulis, Scott Williamson, Rosemary Hollinger, and Richard Wagner.