PRECIOUS METALS TRADING COMPANY RECEIVES $2.2 MILLION JUDGEMENT FOR ROLE IN FRAUD SCHEME

FROM:  COMMODITY FUTURES TRADING COMMISSION 
August 22 2013

Federal Court Enters $2.2 Million Default Judgment Order against Florida-based Global Precious Metals Trading Company and its Owner, Michael Ghaemi, for Operating a Fraudulent Off-Exchange Precious Metals Scheme

Defendants Misappropriated over $800,000 of Customer Funds, Virtually All of the Customer Funds Solicited and Accepted to Purchase Precious Metals

Washington, DC – The U.S. Commodity Futures Trading Commission today announced that it obtained a federal court default judgment Order against Global Precious Metals Trading Company, LLC (GPMT) of Coral Gables, Florida, and its principal Michael Ghaemi of Miami, Florida, charged with running a fraudulent precious metals scheme and misappropriating customers’ funds (see CFTC Press Release 6587-13, May 13, 2013).

The Order, entered by Federal District Judge Ursula Ungaro on August 12, 2013, requires GPMT and Ghaemi to pay a $1.26 million civil monetary penalty, $736,979 in restitution, and to disgorge $186,860 in ill-gotten gains. The Order also imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act (CEA) and CFTC regulations, as charged.

The Order finds that, from at least July 16, 2011 to August 2012, GPMT and Ghaemi illegally solicited and accepted approximately $800,000 from nine U.S. retail customers to purchase physical precious metals, such as gold, silver, platinum, and palladium, on a financed basis, and defrauded the customers in connection with the precious metals transactions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 expanded the CFTC’s jurisdiction over transactions like these and requires that such transactions be executed on or subject to the rules of a board of trade, exchange, or commodity market. This new requirement took effect on July 16, 2011. According to the Order, the financed precious metals transactions offered by GPMT and Ghaemi were off-exchange and therefore illegal.

The Order further finds that GPMT and Ghaemi defrauded their retail customers by claiming to sell actual physical metals, making loans to customers to purchase those physical metals, and arranging for storage of the physical precious metals, when, in fact, they did not purchase or store precious metals, even as they charged customers interest on their loans and storage fees.

The Order further finds that GPMT and Ghaemi misappropriated virtually all of their customers’ funds and lost virtually all of those funds to either personal or other unauthorized use of the funds or through speculative margin trading in an account at a London brokerage. As a result, customers were left with no precious metals and with only a fraction of their funds having been returned to them, according to the Order.

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

CFTC Division of Enforcement Staff responsible for this case are Camille Arnold, Heather Johnson, Joseph Konizeski, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

CFTC’s Precious Metals Fraud Advisory and Enforcement Actions

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 Advisory specifically warns that companies often fail to purchase any physical metals for their customers, instead simply keeping the customer’s funds. The CFTC’s Advisory further cautions customers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.

In recent months, the CFTC has brought several actions against entities and individuals who purport to buy precious metals and transfer ownership of those metals to customers, when insufficient metal, or no metal at all, is in fact purchased and delivered