CFTC TAKES ACTION AGAINST OWNER AND COMPANY ENGAGED IN OFF-EXCHANGE PRECIOUS METALS TRANSACTIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges New York-Based The Yorkshire Group Inc. and Its Owner, Scott Platto with Engaging in Illegal, Off-Exchange Precious Metals 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 Eastern District of New York against Defendants The Yorkshire Group Inc. (Yorkshire) of Staten Island, New York, and its sole owner, Scott Platto, also of Staten Island. The CFTC Complaint, filed on September 25, 2013, charges the Defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers. The Complaint further alleges that Platto, as the owner, operator, and controlling person of Yorkshire, is liable for Yorkshire’s violations of the Commodity Exchange Act (CEA)

According to the Complaint, between September 2011 and August 2012, the Defendants solicited retail customers by telephone to buy physical precious metals such as silver and palladium in off-exchange leverage transactions. Retail customers engaging in financed transaction with Yorkshire were allegedly told that they were borrowing money to purchase precious metals. Customers paid Yorkshire a portion of the purchase price for the metals, and Yorkshire financed the remainder of the purchase price, while charging the customers interest on the amount they purportedly loaned to customers. The Complaint further alleges that Yorkshire’s customers never took delivery of the precious metals they purportedly purchased and that the Defendants neither bought, sold, loaned, stored, or transferred any physical metals for these transactions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which expanded the CFTC’s jurisdiction over retail commodity transactions like these, prohibits fraud in connection with such transactions, and requires that these transactions be executed on or subject to the rules of a board of trade, exchange, or contract market. Thus, since Yorkshire’s and Platto’s transactions were executed off exchange, they were illegal, according to the Complaint.

When Yorkshire and Platto allegedly engaged in these illegal transactions, they were acting as a dealer for metals merchant 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). On February 25, 2013, the court granted a preliminary injunction against Hunter Wise, froze the firm’s assets, and appointed a corporate monitor to assume control over those assets (see CFTC Press Release 6522-13).

In its continuing litigation against Yorkshire and Platto, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the CEA, as charged.

The CFTC Division of Enforcement staff responsible for this action are Karin N. Roth, Philip Rix, David W. MacGregor, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.

CFTC’s Precious Metals Fraud Advisory

In January 2012, the CFTC issued a Precious Metals Consumer Fraud Advisory to alert customers to precious metals fraud. The Advisory states that the CFTC had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Advisory specifically warns that companies often fail to purchase any physical metals for their customers, instead simply keeping the customer’s funds. The Advisory further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.