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January 28, 2013
CFTC Charges Four Florida-based Precious Metals Firms and Three Individuals for Engaging in Illegal Retail Off-Exchange Transactions in Precious Metals
CFTC Orders Bar Secured Precious Metals International, Inc., Secured Precious Metals Management, Inc., Barclay Metals, Inc., Universal Clearing, LLC, Linda Laramie, Sean Stropp, and Sylvia Williams from commodities industry for five-years
Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued two Orders filing and settling charges against two Fort Lauderdale, Fla. companies, Secured Precious Metals International, Inc. and Secured Precious Metals Management, Inc., and their sole owner and principal, Linda Laramie (collectively SPM), as well as two West Palm Beach, Fla. companies, Barclay Metals, Inc. and Universal Clearing, LLC, and their owners and principals, Sean Stropp and Sylvia Williams (collectively Barclay), all for engaging in illegal off-exchange financed transactions in precious metals with retail customers.
The Illegal Transactions
The CFTC Orders find that from July 2011 through June 2012, SPM and Barclay solicited retail customers, generally by telephone or through their websites, to buy and sell physical precious metals, such as gold and silver, in off-exchange leverage transactions. According to the Orders, customers paid as little as 20 percent of the purchase price for the metals, and SPM and Barclay purportedly financed the remainder of the purchase price, while charging the customers interest on the amount borrowed. The CFTC Orders state 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 Orders, financed transactions in commodities with retail customers like those engaged in by SPM and Barclay must be executed on, or subject to, the rules of a board of trade that has been approved by the CFTC. Since SPM and Barclay’s transactions were done off-exchange with customers who were not eligible contract participants, they were illegal, the Orders find.
The CFTC Orders also state that SPM and Barclay acted as dealers for Hunter Wise Commodities, LLC (Hunter Wise), a metals merchant. The CFTC filed suit in federal court in Florida against Hunter Wise on December 5, 2012 (see CFTC Release 6447-12). However, as alleged in the CFTC complaint against Hunter Wise and according to the orders entered against SPM and Barclay, neither SPM, Barclay, nor Hunter Wise purchased physical commodities on the customers’ behalf, disbursed any funds to finance the remaining portion of the purchase price, or stored any physical commodities for customers. The Orders find that SPM and Barclay’s customers thus never owned, possessed, or received title to the physical commodities that they believed they purchased.
The CFTC Orders require SPM and Barclay to cease and desist from violating Section 4(a) of the Commodity Exchange Act, as charged, and prohibit them for a five-year period from trading on or pursuant to the rules of any registered entity. The Orders also require SPM and Barclay to comply with certain undertakings, including cooperating fully and expeditiously with the CFTC in related matters. The Orders, which do not impose civil monetary penalties, acknowledge the substantial cooperation of SPM and Barclay.
CFTC’s Precious Metals Fraud Advisory
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 (see the Advisory). The CFTC’s Precious Metals Consumer Fraud Advisory specifically warns that frequently companies do not purchase any physical metals for the customer, instead simply keeping the customer’s funds. The Advisory further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.
CFTC Division of Enforcement staff responsible for this matter: David Terrell, Joy McCormack, Jennifer Chapin, Steve Turley, Jeff Le Riche, Elizabeth M. Streit, Scott R. Williamson, Rosemary Hollinger, Rick Glaser, and Richard Wagner.
