Commodities & Precious Metals Arbitration & Litigation

Boca Raton, Florida Commodities and Precious Metals Fraud Attorney Russell L. Forkey

Precious metals - gold, silver, platinum and palladium - are bought by investors primarily to hedge against inflation, economic uncertainty, and foreign exchange risk, in the belief that these metals, particularly gold, are repositories of absolute value, whereas paper currencies and securities dominated in such currencies have relative value and are vulnerable to loss. Precious metals are traded by "speculators" who hope to profit from volatility in the financial market place.  If you are not a qualified speculator, you should think long and hard about investing in this arena.

With the above said, unsophisticated consumers should be on the alert for companies that sell investments in precious metals and other commodities based on sales pitches claiming that customers can make a lot of money, with little risk, by purchasing metal through the use of a financing agreement. Sometimes these companies offer opportunities that speculate on the price movement of precious metals, or other commodities such as heating oil, without actually taking delivery of the commodity.

Certain companies advertise on radio, television or internet websites, or make telephone "cold calls" to promote the purchase of precious metals such as gold, silver and platinum. The experience of Attorney Forkey in having dealt with clients over the years that have gotten involved with such companies is this: more likely than not, the advertisements, infomercials and telephone solicitations often promise quick riches - such as the ability to double or triple the customer's initial investment in just two or three months - all with low risk. Companies making such statements typically ask that customers pay only a small percentage of the total purchase price, and also claim that they (or another company) will purchase and store the metal. These companies also pretend to arrange financing for the customer's metal purchases so the customer can obtain a larger profit by controlling a larger amount of metal with their relatively small down payment. Companies often discourage customers from taking delivery of the metal. These companies often charge a commission for the purchase transaction, a loan origination fee, an interest charge on the remaining balance (which accrues over time), and fees relating to storage and shipping of the metal they pretend to purchase for the customer. Sometimes, not all of these fees are disclosed up front.

As an average, honest individual, it is difficult to understand the mindset of a fraudster.  To provide you with in-site into the mind of a thief, we have attached a copy of a typical sales pitches used by such individuals.  Please follow this link.  Additionally, we have provided you with a copy of a typical " close" by these precious metals companies.  After reading the "pitch" and the "close", you can see why there is so much danger involved in dealing with these companies.

If you are contacted about investing in precious metals or other commodities look for these warning signs:

  • Avoid any company that predicts or guarantees large profits with little or no risk.
  • Be wary of high-pressure tactics to convince you to send or transfer cash immediately to the firm, via overnight delivery companies, the internet, by mail, or otherwise.
  • Be skeptical about unsolicited phone calls about investments from offshore salespersons or companies with which you are unfamiliar.
  • Be sure you get all information about the company and verify that data, if possible.
  • Learn all possible information about fees and commissions charged, and the basis for each of these charges.
  • If it sounds to good to be true, it is, don't invest.

If you have already gotten involved with such a company and you believe that the company, through its representative, lied about or overstated their ability to predict prices or the direction of the metals markets; minimized the degree of investment risk involved in metals investments; fraudulently failed to disclosure how much the price of metal must go up for the customer to break even (let alone profit), since hefty finance and storage fees and commissions, are deducted from the customer's account before any profits accrue; falsely claimed to be purchasing and storing the metal, when they do not actually do so; and have charged phony "storage" fees for metal, when no metal is actually purchased or stored; charged phony "interest" fees that diminish a customer's account equity to the point where the customer has to deposit additional funds with the company or have his account closed out at a total loss or failed to point out that , because you are buying on "margin" or with leverage, you will have to send the company additional funds (or sell a portion of your "metal position") if the price of the precious metals moves unfavorably. If you have been exposed to any of these things, call the Law Office of Russell Forkey for an immediate free initial consultation. Time is not on your side.

To graphically demonstrate how these scams work, I will provide you with two recent examples. In the first example, out of a $160,000 investment, the clients in three weeks lost $105,000. $95,000 of the loss was the direct result of commissions and administrative fees charged by the firm. In the second example, the investor, a foreign citizen, lost approximately$38,000 out of a total investment of approximately $44,000. Approximately 50% of the investment was charged as commissions and administrative fees by the broker. In the first case, the clients would have had to make almost a 100% return on their investment just to break even. In the later case, the client would have had to make approximate 50% return to break even. This makes no sense whatsoever.

Recent Important Update:

In recent conversations with governmental authorities, it appears that many of the so-called precious metal "clearing companies" do not take possession of the metals. What apparently transpires is the following;

  • client is required to have 20% equity in his account with clearing firm A.
  • clearing firm A enters into an agreement with clearing firm B which is outside of the United States that allegedly only requires 5% equity in the account. The difference plus a percentage of the interest charged is pocketed by clearing firm A.
  • What clearing firm B does is almost impossible to ascertain because it is usually outside of U.S. jurisdiction. What I mean by that is that clearing firm B may or may not have the metal or clearing firm B may allegedly deal with clearing firm C, which is in another jurisdiction from the other two clearing firms, which may or may not have the metal.

Under these circumstances, the investor might never find out if he or she ever had an interest in the actual metal as opposed to everything being on paper. It would be the equivalent to a ponzi scheme.

These types of situations may be brought under control, if the CFTC begins to license these firms for as it stands now, they are basically unregulated.  It's almost like the "wild west".

If these precious metals firms do become subject to regulation, it is our belief that many of them will go out of business.  Consequently, time is of the essence if you have lost money and want to attempt to recover the same.

 Contact Us

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of the law relating to precious metals fraud, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.