The US Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action in the US District Court of Florida against three residents charged with fraud and an illegal off-exchange precious metals racket, according to a CFTC filing.
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In particular, Jeffrey Slemmer, Christian Dorrian, and Adam Roth, with their respective Florida string of companies, Slemmer Enterprises LLC, Dorrian Enterprises, LLC, and Roth Investment Group LLC, have been charged with fraud. The charges range from fraudulent activity, illegal, off-exchange transactions in precious metals, and engaging in trading activities as unregistered futures commission merchants (FCMs).
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The scheme itself was conducted under the moniker Berkley Hard Asset Group, Berkley Hard Assets, and Berkley Rare Diamonds, which had been going on since at least 2012. During this period the aforementioned individuals managed to fraudulently solicit over $2.7 million from at least 60 customers for the purchase of precious metals.
Furthermore, the scheme also seeded false promises that precious metals would be purchased and stored at a ‘depository’ on the customers’ behalf, which did not in fact occur. Rather, the individuals misappropriated customer funds for other purposes.
The scheme itself employed the use of a technique known as “bait-and-switch”, which works by soliciting customers to purchase precious metals, then urging them to sell their purported precious metal holdings and purchase diamonds instead. Subsequently, customers are left holding diamonds worth far less than what the defendants represent and only a small fraction of the customer’s original investment. As a result, the CFTC is seeking disgorgement of ill-gotten gains, as well as a civil monetary penalties, and restitution for the benefit of customers.