The US Commodity Futures Trading Commission (CFTC) announced today that a Florida court has granted the CFTC’s motion for entry of a final default judgement against International Monetary Metals (IMM) and its controller, Martin Sommers.
The judgement requires that the defendants repay fraudulent gains of $2,469,783 and penalties totalling $7,409,349. The judgement also imposes permanent trading, solicitation and registration bans against the defendants and prohibits them from violating provisions of the Commodity Exchange Act (CEA).
Illegal off-exchange transactions in precious metals
The case stems from a CFTC complaint, filed on 30 September 2014, which charged IMM and Sommers with engaging in illegal, off-exchange transactions in precious metals, including gold and silver, with retail customers on a leveraged, margined, or financed basis and charged IMM with acting as a Futures Commission Merchant (FCM) without being registered with the CFTC.
The judgement found that, from 16 July 2011 to 31 March, 2013, the defendants solicited retail customers to engage in leveraged, margined or financed precious metals transactions, and IMM received, in total, $2,469,783 in commissions from 185 customers.
IMM also solicited or accepted orders for retail commodity transactions and in connection with such orders accepted funds and thus acted as an unregistered FCM.
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Finally, the judgment found that Sommers, as controlling person for IMM, is liable for IMM’s violations of the CEA as well as his own, and that IMM is liable as principal for the CEA violations committed by its officers, employees, and agents, including Sommers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, off-exchange leveraged, margined, or financed transactions such as those conducted by the defendants are illegal unless they result in actual delivery of metal within 28 days.
According to the judgement, precious metals were never actually delivered to defendants’ customers either by the defendants or by the precious metals wholesalers, Worth Group Inc. and AmeriFirst Management, through which the defendants conducted their customers’ precious metals transactions.
Previous Enforcement Actions
The CFTC has previously brought enforcement actions against both Worth and AmeriFirst in a US court.
The CFTC sued Worth in August 2013, charging the firm with engaging in illegal, off-exchange precious metals transactions and other violations, and settled with it in February 2016.
The Commission also sued AmeriFirst in July 2013, charging it with engaging in illegal, off-exchange precious metals transactions, fraud, and other violations.
On 24 July, 2014, the court entered a supplemental consent order against AmeriFirst and the three individual defendants requiring them to pay more than $25 million in restitution and $10 million in penalties.