Dodd-Frank Violations Lead to a $1.3 mln Fine for Gold Distributors Inc

Precious-metals trading company Gold Distributors Inc. has violated the Dodd-Frank amendments to the Commodities Exchange Act (CEA) after engaging in illegal precious-metals transactions. The US Commodity Futures Trading Commission (CFTC) has announced that a default judgement against the company has been entered by a US district court.

In addition, the firm and its owner, Jordan Cain, are liable for paying restitution in the amount of $337,266 and a civil monetary penalty totalling $1,011,800. The defendants have also been prohibited from further violating provisions of the CEA.

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Between January 2012 and February 2013, Gold Distributors Inc. and Cain solicited retail customers by telephone and in person to buy physical precious metals, such as gold and silver, in off-exchange leverage transactions.

Customers paid the company a portion of the purchase price for the metals, and another entity, AmeriFirst Management LLC, financed the remainder of the purchase price while charging the customers interest on the amount they purportedly loaned to customers.

Retail customers engaging in financed transactions with GDI were told that they were borrowing money to purchase precious metals. However, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, financed transactions such as those conducted by Gold Distributors Inc. are illegal unless they result in physical delivery of metal within 28 days.

Neither the defendants nor AmeriFirst actually delivered any precious metals to any of the customers.

According to the court Order, the defendants introduced 27 customers to AmeriFirst Management LLC and transferred at least $797,577 to AmeriFirst for the purchase of precious metals. The defendants received commissions and fees totalling at least $337,266 for the retail-financed, precious-metals transactions executed through AmeriFirst.

Last year, the court found AmeriFirst and its principals liable for illegal, off-exchange precious-metals transactions and fraud, and imposed sanctions of over $35 million against AmeriFirst and its principals.