A Florida couple and their company, North American Asset Management, LLC (NAAM), have been ordered to pay more than $1.6 million in penalties for alleged illegal, off-exchange precious metals transactions and registration violations.
The U.S. Commodity Futures Trading Commission said Tuesday that Judge Jose E. Martinez of the U.S. District Court for the Southern District of Florida granted the CFTC’s motion for a final default judgement against the company and its owners Alexi Bethel and Steven Labadie, who also control and manage NAAM.
From March 2012 through at least March 2013, NAAM solicited retail customers to engage in leveraged, margined, or financed precious metals (including gold and silver) transactions and it received through its employees, in aggregate, $2.5 million in addition to at least $648,759 in commissions from such customers, the judgement states.
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The order also finds that the company accepted clients’ trades and funds and therefore acted as a Futures Commission Merchant (FCM), without registering as such with the CFTC.
As alleged in the complaint, the defendants executed their unlawful scheme through several brokers including Hunter Wise, Lloyds Commodities and AmeriFirst. The CFTC filed enforcement actions and entered consent orders against the three brokers, charging them with engaging in illegal transactions, and they were already fined to solve the agency’s claims. The orders also imposed permanent trading, solicitation and registration bans against them.
According to the complaint, the defendants represented to customers that precious metals would be purchased and stored at a depository on the customers’ behalf. The defendants, however, generally failed to purchase and store sufficient amounts of precious metals for their customers, instead misappropriating customer funds for other purposes.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, off-exchange leveraged transactions such as those conducted by the defendants are illegal unless they result in actual delivery of metal within 28 days. However, the regulator found that precious metals were never delivered to the customers, court documents state.