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Off-Market Trading

Recently, regulators from the Commodity Futures Trading Commission (CFTC) brought charges against Sentry Asset Group LLC, based in Boca Raton for alleged trading of precious metals off the formal exchange. The lawsuit claims that between March 2012 and July 2013, Sentry solicited and accepted orders for precious metals. Their customers paid over $1.1 million in numerous precious metals transactions, resulting in nearly $300,000 in commission and fees for the company. However, these transactions were illegal, because in any sale of precious metals, the good must be delivered within 28 days in order to comply with regulations. In the case of Sentry Asset Group, it is alleged that the purchased precious metals were not delivered at all.

Sentry solicited transactions through telemarketing, targeting retail customers to carry out retail commodity transactions off the official exchanges. They partnered with other companies who deal in precious metals, but who are not registered to do so with the CFTC.

The Role of the Commodities Futures Trading Commission

The CFTC was established in 1974 to monitor futures trading, which mostly took place in the agricultural sector. The mission of the CFTC has expanded to protect market users, consumers, and the public from fraud, manipulation, and abusive practices in the trading of derivatives and other products that are subject to the Commodity Exchange Act.

The Act makes it unlawful for a commodity trading advisor, commodity pool operator, or their associates to use the mail or any other instrument of interstate commerce to directly or indirectly employ any scheme or practice to defraud any client or prospective client. This statute covers a wide range of behaviors, and is used to prosecute many forms of fraud.

With respect to precious metals trading, many activities have been identified as fraudulent for purposes of prosecution, including:

  • Claiming to, but not using buyers’ money to purchase metals at any time;
  • Charging fraudulent interest after not actually arranging for loan financing with an independent financial institution;
  • Charging storage fees, while not really storing the commodity with an independent bank or storage facility;
  • Failing to point out that because a customer is not paying full price for the metals, they will have to send additional funds if prices move unfavorably; and
  • Using clients’ funds for a commission without providing a legitimate service.

The punishment for violations of the Commodity Exchange Act can be harsh, and is not limited to restitution to those who were allegedly defrauded. In addition, large fines can be levied, and prison sentences can be ordered by federal judges. If you have been accused of engaging in any of these activities, or if charges have been brought against you by the CFTC, you should seek the advice of an experienced defense attorney immediately. Quick action by a seasoned lawyer can protect your rights and reputation. Jeffrey S. Weiner, P.A. has decades of experience defending clients against charges of commodities fraud and other white collar crimes. Contact the office Miami for a free consultation on your criminal case today.

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