Whether you are considering purchasing gold or you already own a significant amount, you must remain vigilant to financial scams. Here, we will examine some of the most common gold-related scams currently making the rounds.

Scams to watch out for this year

Every industry has its share of frauds, and gold is no different. These are some scams currently circulating in the gold industry, plus how you can avoid them:

• Misleading claims: Overstating the value of gold, making hyperbolic claims about investment returns and overstating scarcity has become common. Fraudsters do this to inflate value and line their own pockets. To avoid falling for a misleading claim, do plenty of research before you decide to invest.
• “Empty vault” schemes: In a so-called empty vault scheme, a fraudulent dealer that does not have access to a secure vault tricks an investor into paying for storage anyways. Before paying for storage services, determine for certain whether the dealer has access to a secure storage facility.
• Phishing: Garden-variety phishing scams are always prevalent. With the gold market on the rise, phishers are increasingly targeting potential investors in gold and other rare metals. To prevent phishing, do not click the links in suspicious-looking emails and beware of giving out your personal information online.

Scams may be on the rise, but this should not necessarily discourage you from purchasing gold. Research every transaction carefully so that you make wise purchases from reputable sources. And if you suspect a scam, report it to the authorities immediately.

SEC Halts $32 Million Scheme That Promised Riches From Amber Mining

The Securities and Exchange Commission recently announced it has filed fraud charges and obtained asset freezes against the operator of a worldwide pyramid scheme that falsely promised investors would profit from a venture purportedly backed by the company’s massive amber holdings.

California resident Steve Chen and 13 California-based entities, including USFIA Inc., are at the center of the alleged scheme, the SEC said in a complaint filed in federal court in Los Angeles. According to the SEC’s complaint, USFIA and Chen’s other entities have raised more than $32 million from investors in and outside the U.S. since at least April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.

The Hon. R. Gary Klausner of the U.S. District Court for the Central District of California granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. In addition to the temporary relief, the SEC is seeking preliminary and permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and civil penalties. The complaint, which had been filed under seal, alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.

According to the SEC’s complaint, Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Argentina and the Dominican Republic. Investors were told that they could profit by investing in amounts ranging from $1,000 to $30,000, and earn larger returns based on the number of investors they brought into the program. The SEC further alleges that beginning in September 2014, the defendants claimed to have converted existing investors’ holdings into “Gemcoins,” which they said was a virtual currency secured by the company’s amber holdings. In reality, the SEC complaint alleges that Gemcoins are worthless.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, 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.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

The below script gives the reader a flavor of what might be said in a typical unsolicited call from a precious metals telemarketer. However, please keep in mind that this is a generic example. Many varaiations of this exist as do materials which have been prepared to assist the telemarkerter in over comming any objection or negitative question that you might have.

TYPICAL TELEMARKETING PRECIOUS METALS SCRIPT

Hello _________________, my name is ________________ and I’m a Senior

Account Executive with _____________________________, our license number is TC __________________, my TP license number is _________________

(insert salesperson’s license number). I’m glad I was able to reach you.

The reason for the call is that I’m in the process of sending you a special marketing report on the gold/silver/palladium/cooper/platinum market. Now ________________, have you ever invested in precious metals before?

Do this: grab a pen and paper, jot down my name and you can contact me toll free (888) __________. Let me know when you’re ready. (Give name and phone number).

Right now, my company believes that silver/gold/palladium/cooper/platinum is poised to rise in price over the next 6 months. Now follow me closely on this.

First-you still have that pen, right? (Excellent). Draw a dollar sign, and beside it draw an arrow pointing down. Got it? (Great).

Now, the U.S. dollar has fallen in value over the past few years and, as a result, silver/gold/palladium/cooper/platinum has risen to multi-year highs….and because of their relationship, as the dollar loses value, these metals gain value. Do you follow me? Additionally, top analysts round the globe feel that we are entering a time similar to the seventies when paper assets fell out of favor in place of hard assets. With the twin deficits growing to historic proportions, it’s been anticipated that in the next few years, we will experience a massive slide in the value of the U.S. Dollar. So what do you think is going to happen to the price of metal as the U.S. dollar continues to take its blows? Absolutely! In fact, most of the leading analysts are calling for $__/oz. Silver/gold/palladium/cooper/platinum by years end!

Second, there is a major supply and demand imbalance in silver/gold/palladium/cooper/platinum. With countries like China and India growing at the fastest rate in history, the demand in metals continues to increase, what do you think will happen to the price? Exactly! It is just that simple.

Third, we also look at global mishaps. We have war continuing in the Middle East, we have the threat of nuclear capability from Iran and Korea, and ongoing worries concerning Al-Qaeda’s next strike….All of these factors have created a frenzy of investors seeking a safe haven to invest in, and for thousands of years that safe haven has always been precious metals. _______________, if everyone is afraid of global political tensions and continuing to stockpile precious metals, how do you think this will affect the price? Absolutely! Does that make sense to you/

Now let me show you how our program works…..we use a (3) step approach. Follow me closely.

First, it takes advantage of long-term trends as well as short-term movements in the market. You want a firm that isn’t married to the market. If we find additional opportunities in the other markets we want to remain flexible so you, as our customer, can capitalize on those situations.

Second, it gives you the flexibility of utilizing fundamental and technical analysis.

Last, and most important, the commission is only 15% of the total metal value and paid only once for the lifetime of the account, meaning the metal you purchase can be bought and sold as many times as you choose with no additional commission. You will not be charged a fee until your agreement for services is returned signed and until your first investment is made. Now, we provide all of the research for you. Our job is to guide you through the market.

Now, ____________, of course I can’t guarantee you profits. So, ___________, because investments like these aren’t for everyone, let me ask you again….can you truly afford and risk and investment of $_____________, without changing your lifestyle? (Wait for answer, and re-qualify if necessary for suitability, interest, age, occupation, income, experience, etc…..) That’s great! Do you have any other questions right now about our Precious Metals Program?

Being what the mail is these days, you can assume that it will take two to three days to receive our information. What address do you want it sent to? My firm requires me to provide full disclosure to all considering parties. Will anyone else be involved in the decision making process? (Wait for answer).

After you review the program and materials, and I’ve answered all of your questions to your satisfaction and you truly understand how the program works, can you see yourself getting involved? That’s good enough for me! And don’t forget, write down any questions that you have and get back to me on my toll-free number (888) __________.

Now, I’ve explained the reasons but it’s important that I also explain exactly who we are because it’s important to know exactly whom you are dealing with, right? Besides, I wouldn’t take you aboard as a customer unless you knew the answer to that question. The firm I represent is _____________. We specialize in finding fundamental and technical situations throughout the precious metals markets. We don’t trade options or risky futures contracts. We deal only with tangible, physical assets- in this case, bars, bullion and coins. Do you understand me so far?

Great! My secretary is going to send you research material, news articles and some risk disclosures so you can fully understand the market we’re going into. Do you follow me?

Now, based on this information and potential opportunities that exist within this market- it made sense to you-what dollar amount could you work with?

Please jot down a couple of facts to correlate with the package I’m sending you. I want you to make a decision based on the facts and not emotion; does that make sense to you? Excellent!

One of the greatest advantages of trading in precious metals is the ability to use leverage. Are you currently utilizing leverage in the stock market, or do you typically buy and hold on a one to one basis? Follow me closely on this. THIS IS THE KEY!

We are discussing an investment of $______________- jot that down. Now with metal at $___ an ounce, on a one to one basis, you would only be able to purchase _______ounces.

However, with leverage factor of 2 ½ times, we have the ability to leverage _________ ounces of your metal. So you would be leveraging $________ in bullion. And that’s the beauty of it; we have the potential to make money on what we leverage, not the amount we invest. Do you follow me? Now, every time your metal moves $1 dollar, you make $_______ minus commission and fees. Does this make sense to you? Write that down. Great!

Some quick math….write down$25; below it write $18… what’s the difference? Exactly! It’s simple math.

What is $7 x _____(=# of ounces)? What do we get? Yes! A gross potential profit minus commission and fees. Any questions?

And once again, there are no guarantees, which is why we only recommend risk capital for this purchase. Is that clear? Great!

Pursuant to Florida Statutes, you may cancel the Agreement we have you sign within three (3) business days upon receipt of confirmation. Please understand that no purchases will be made, or any markets invested into, until the required 3 business days have passed.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, 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.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

On December 14, 2011, the Commodity Futures Trading Commission (“Commission”) issued in the Federal Register an interpretation regarding the meaning of the term “actual delivery,” as set forth in the Commodity Exchange Act. Recently, the Commission determined to clarify its interpretation, which is reflected in the attached link.

This interpretation is important from the prospective of both sellers and buyers of precious metals using leverage. From a sellers standpoint, failure to comply with the actual delivery provisions, discussed in the interpretation could led to adverse consequences from an enforcement action brought by the Commission or in a civil action brought by a purchaser. CFTC Interpretive Release – Actual Delivery

Please keep in mind that this information is being provided for informational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning the contents of this post, you should consult with a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities, commodities and precious metals law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

CFTC alleges that Defendants, who took in more than $73 million, defrauded customers in connection with precious metals transactions and engaged in illegal off-exchange commodity transactions

The United States Commodity Futures Trading Commission (CFTC) recently announced that on August 13, 2013, it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Worth Group Inc. (Worth), as well as its owner, Andrew Wilshire, and its sole officer and director, Eugenia Mildner, all of Jupiter, Florida. The CFTC’s Complaint charges that Defendants defrauded retail precious metals customers and engaged in illegal, off-exchange retail commodity transactions from July 16, 2011, through the present.

According to the Complaint, Worth purported to sell physical metal, including gold, silver, platinum, and palladium, on a fully-paid basis, as well as on a financed basis, to hundreds of retail customers located throughout the United States. The Complaint alleges that Worth falsely represented to customers that, within 28 days of a customer’s purchase, Worth would deliver metal either to the customers directly or to a depository that would hold the metal for the customer. The Complaint alleges that pursuant to the scheme, Worth took in over $73 million in customer funds between July 18, 2011, and December 31, 2012.

As alleged, in connection with fully-paid transactions, customers paid the full purchase price to Worth for metals, having been told that Worth would deliver metal in return. The Complaint alleges that from at least August 15, 2011, through November 8, 2012, however, Worth did not actually deliver metal to most customers. Instead, rather than deliver actual metal, Worth’s typical practice after receiving customer money was to purchase metals derivatives in accounts owned by Worth. These derivatives purportedly “covered” customer transactions, but, contrary to Worth’s representations to customers, did not involve the purchase, transfer, or physical delivery of precious metals to Worth, let alone to its retail customers.

Retail customers engaging in financed transactions with Worth were told that they were borrowing money to purchase precious metals. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), a financed transaction such as that conducted by Worth is an illegal off-exchange transaction unless it results in actual delivery of metal within 28 days. The Complaint alleges that Worth often failed to make such delivery on a timely basis. Worth thus defrauded its customers and subjected them to undisclosed exposure to Worth’s credit, as they were left with only Worth’s commitment to deliver metal rather than the promised metal itself.

The Complaint further alleges that as persons controlling Worth’s precious metals operations, Wilshire and Mildner are liable for Worth’s violations of the Commodity Exchange Act and a CFTC Regulation.

The CFTC is seeking preliminary and permanent civil injunctions in addition to other remedial relief, including restitution, civil monetary penalties, and disgorgement of ill-gotten gains.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Securities and Exchange Commission v. John Fowler, Jeffrey Fowler, and Julianne Chalmers, Civil Action No. 8:13-cv-1747-T-17TGW

The Securities and Exchange Commission recently announced that it filed an enforcement action on July 5, 2013 against John Fowler, a convicted felon, Jeffrey Fowler, a former Florida public school teacher, and Julianne Chalmers. The SEC charged John Fowler and Jeffrey Fowler with violations of the antifraud provisions of the federal securities laws. The SEC also charged John Fowler and Julianne Chalmers with registration violations.

From January 2011 through November 2011, John Fowler and Jeffrey Fowler raised approximately $4.3 million from 70 unsuspecting investors nationwide through a Ponzi scheme disguised as a gold futures investment program. The program purportedly was affiliated with a prominent New York-based hedge fund manager but actually had no connection to this manager and no investment in gold futures. Chalmers solicited investors to invest in the gold futures program by purchasing promissory notes.

The SEC’s complaint, filed in the United States District Court for the Middle District of Florida, alleges that John Fowler masterminded the Ponzi scheme and made misrepresentations and omissions in connection with the offer and sale of the promissory notes. He solicited at least one prospective investor, falsely claiming that a prominent hedge fund manager was the general partner of the investment program, that investor returns were guaranteed, and that he was a fellow investor. The complaint alleges that he also prepared fake promissory notes and assignments of security, and signed them as trustee of the prominent hedge fund manager. Finally, the complaint alleges that John Fowler misappropriated investor funds and unlawfully sold unregistered securities.

The complaint alleges that John Fowler’s son, Jeffrey Fowler, took steps to make the scheme appear legitimate by forming a Florida corporation with an identical name to the actual New York-based hedge fund manager and opening several bank accounts in this corporate name. Investors deposited their funds into this account and Jeffrey Fowler made purported interest payments to investors from these funds. Jeffrey Fowler also allegedly misappropriated investor funds for personal use.

The SEC’s complaint also alleges that by soliciting investors into the scheme, Chalmers unlawfully acted as an unregistered broker-dealer and sold unregistered securities that did not qualify for an exemption from the SEC’s registration provisions. Chalmers received more than $90,000 of investor proceeds in transaction-based commissions.

The SEC’s enforcement action charges John Fowler with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5(a) and 10b-5(c) thereunder; and Jeffrey Fowler with violating Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder. The action charges Chalmers with violating Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. Both John Fowler and Jeffrey Fowler have consented to the entry of judgments, which would enjoin then from violation of the above provisions. These judgments are subject to court approval. The SEC is seeking a permanent injunction, disgorgement, and financial penalties against Chalmers.

The U.S. Attorney’s Office for the Middle District of Florida conducted a parallel investigation of this matter, which resulted in felony convictions against John Fowler and Jeffrey Fowler. Both Fowlers are currently serving prison sentences. U.S. v. John Henley Fowler, 8:12-CR-359-T-35TGW (M.D. Fla. 2012); U.S. v. Jeffrey Robert Fowler, 8:12-CR-358-T-24EAJ (M.D. Fla. 2012).

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

A Numismatic Coin is a coin that is valued based on its rarity, age, the quantity originally produced, and condition. These coins are bought and sold as individual items within the coin collecting community. Most Numismatic Coins are legal tender coins that were produced in limited quantities to give them scarcity value. They are historic coins which also can be rare. The current price of gold is a minor factor when dealing with Numismatic Coins. Premiums are traditionally far higher than those of Bullion Coins, and values fluctuate to a much wider extent. For example a $5 gold piece may may contain $70 dollars of gold but may sell for as much as $700. The minimum amount recovered from Numismatic Coin investments is always either its face value or its metal content.

With the above in mind, anyone considering investing in Numismatic Coins should think twice, especially if the investor is dealing with a firm located in another city or state. In our opinion, Numismatic Coins should never be purchased with anything other than absolute risk funds.

Please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions conerning this post, the reader should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

SEC SETTLES WITH MATTHEW PROUDFOOT AND LAURIE VRVILO IN GOLD MINING OFFERING FRAUD CASE

The Securities and Exchange Commission recently announced that it has obtained Final Judgments against defendants Matthew Dale Proudfoot (“Matthew”) and Laurie Anne Vrvilo (“Laurie”) in district court litigation in which the SEC alleged they participated in a gold mine investment scheme. According to the SEC’s Complaint, Matthew and Laurie falsely promised investors whopping returns from a gold mining operation while investors’ money was actually spent on family cars, jewelry, vacations, and vitamin supplements.

On July 17, 2012, the SEC filed a Complaint alleging that Harry Dean Proudfoot III of Mt. Vernon, Ohio, and his children Matthew of Colbert, Wash., and Laurie of Tigard, Ore., raised $2.7 million from approximately 140 investors in 23 states through their Portland, Oregon-based company 3 Eagles Research & Development LLC (3 Eagles).

The SEC’s complaint charged 3 Eagles, Harry Proudfoot, Matthew Proudfoot and Laurie Vrvilo with violations of Sections 5(a), 5(c) and 17 (a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5(a), (b) or (c) thereunder. The complaint also charges Bukantis with violating Section 15(a)(1) of the Exchange Act by selling securities as a unregistered broker. The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil monetary penalties.

In their Consents to the Final Judgments, Matthew and Laurie agreed, without admitting or denying the Complaint’s allegations to the entry of permanent injunctions prohibiting their future violations of Sections 5(a), 5(c) and 17 (a) of the Securities Act and of Section 10(b) of the Exchange Act and Rule 10b-5(a), (b) or (c) thereunder. Matthew and Laurie also agreed to be jointly and severally liable for the disgorgement of the approximately $2.72 million raised from 3 Eagles investors between September 2009 and October 2011, plus prejudgment interest on that amount. Based upon the financial information submitted by Matthew and Laurie to the Commission, the Final Judgment does not impose any civil monetary penalties against them.

The SEC’s case is still pending against 3 Eagles, which has defaulted in the litigation, and against Harry Proudfoot and Dennis Bukantis, who have filed answers in the litigation.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

The U.S. Commodity Futures Trading Commission (CFTC) recently issued an Order filing and settling charges against two Boca Raton, Fla., companies, Joseph Glenn Commodities LLC (Joseph Glenn) and JGCF LLC (JGCF), and their sole owners and principals, Scott Newcom and Anthony Pulieri (the Respondents) for engaging in illegal, fraudulent off-exchange financed transactions in precious metals with retail customers.

The CFTC Order, filed on March 27, 2013, requires Joseph Glenn, JGCF, Newcom, and Pulieri to pay approximately $635,000 in restitution to customers for their losses and to return approximately $330,000 remaining in customers’ accounts. The Order requires Pulieri to pay a civil monetary penalty of $100,000. The Order also permanently prohibits the Respondents from registering with the CFTC and imposes a five-year trading ban on trading for others. In addition, the Order prohibits the Respondents from violating the Commodity Exchange Act, as charged, and requires them to comply with certain undertakings, including fully and expeditiously cooperating with the CFTC.

The Illegal and Fraudulent Transactions

The CFTC Order finds that from July 2011 through June 2012, the Respondents solicited retail customers, generally by telephone or through Joseph Glenn’s website, to buy physical precious metals such as gold, silver, copper, platinum, or palladium in what are known as off-exchange leverage transactions. According to the Order, the customers paid the Respondents a portion of the purchase price for the metals, and Joseph Glenn and JGCF purportedly financed the remainder of the purchase price, while charging the customers interest on the amount they purportedly loaned to customers.

The CFTC Order states that such financed off-exchange transactions with retail customers have been illegal since July 16, 2011, when certain amendments of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 (Dodd-Frank Act) became effective. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by the Respondents must be executed on, or subject to, the rules of an exchange approved by the CFTC. Since the Respondents’ transactions were done off-exchange with retail customers, they were illegal.

Furthermore, the CFTC Order states that when Joseph Glenn and JGCF engaged in these illegal transactions they were acting as dealers for a metals merchant called Hunter Wise Commodities, LLC (Hunter Wise), which the CFTC charged with fraud and other violations in federal court in Florida on December 5, 2012 (see CFTC Press Release 6447-12). Hunter Wise was purportedly Joseph Glenn’s and JGCF’s source for the metal and the loans. As alleged in the CFTC Complaint against Hunter Wise and according to the CFTC Order in this case, however, neither Joseph Glenn, JGCF, nor Hunter Wise purchased or held metal on the customers’ behalf, or disbursed any funds to finance the remaining balance of the purchase price. The Order finds that the Respondents’ customers thus never owned, possessed, or received title to the physical commodities that they believed they purchased.

The Order also finds that the Respondents defrauded their customers by misrepresenting the profitability of the financed off-exchange transactions and failing to disclose associated commissions, service, and interest fees.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

As a follow up to our recent post concerning the above referenced matter, the Court on February 25, 2013 followed its Order Appointing Special Corporate Monitor of February 22, 2013, by issuing its Order on Plaintiff’s Motion for Preliminary Injunction, which granted the same as more fully referenced in the below link.

Interestingly, the Court provided a brief discussion concerning the jurisdiction of the Commodity Futures Trading Commission (CFTC), with the most recent expansion of that jurisdiction being that contained in Section 742 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which granted the CFTC new authority over certain leveraged, margined, or financed commodity transactions with retail customers, including the authority to prohibit fraud in connection with such transactions in interstate commerce. This decision is extremely important for retail customers purchasing and selling precious metals with the use of leverage.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

As we advised in an earlier post, the Commodity Futures Trading Commission had instituted an action against, among others, the above named parties, which, at the time of filing, included a Motion for Preliminary Injunction, which was filed on December 6, 2012.

On Feburary 22, 2013, the Court held a hearing on the motion. At the hearing, the Court found that the motion was due to be granted. At the conclustion of the hearing, the parties that were present requested that, given the expediency required under the circumstances and the potential harm to the Defendants by the appointment of a receiver, that, at least for the present, the Court appoint a Special Monitor in lieu of a receiver. This request was approved by the Court.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

CFTC Charges Hunter Wise Commodities, Lloyds Commodities, C.D. Hopkins Financial, United States Capital Trust, Newbridge Alliance, Blackstone Metals Group, and their Principals in Multi-Million Dollar Fraudulent Precious Metals Scheme

CFTC alleges that defendants conducted illegal, off-exchange commodity transactions, and deceived customers in connection with financed transactions in precious metals

The U.S. Commodity Futures Trading Commission (CFTC) recently announced that on December 5, 2012, it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Hunter Wise Commodities, LLC; Hunter Wise Services, LLC; Hunter Wise Credit, LLC; Hunter Wise Trading, LLC; Lloyds Commodities, LLC; Lloyds Commodities Credit Company, LLC; Lloyds Services, LLC; C.D. Hopkins Financial, LLC; Hard Asset Lending Group, LLC; Blackstone Metals Group, LLC; Newbridge Alliance, Inc.; United States Capital Trust, LLC; Harold Edward Martin, Jr.; Fred Jager; James Burbage; Frank Gaudino; Baris Keser; Chadewick Hopkins; John King; and David A. Moore. The complaint charges these entities and individuals with fraudulently marketing illegal, off-exchange retail commodity contracts. The complaint alleges that Hunter Wise Commodities, the orchestrator of the fraud, has taken in at least $46 million in customer funds since July 2011.

According to the CFTC complaint, the defendants claim to sell physical metals, including gold, silver, platinum, palladium, and copper, to retail customers in retail commodity transactions. Under the defendants’ retail commodity transactions investment contract, customers allegedly make a down payment on certain quantities of physical metals, usually 25 percent of the total purchase price. Defendants allegedly claim to arrange loans for the balance of the purchase price, and advise customers that their physical metals will be stored in a secure depository.

The complaint further alleges that these statements were false, and that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions, according to the complaint. Defendants allegedly do not own or sell metals to customers; customers are charged storage and insurance fees on metals that do not exist; and are charged interest on loans, which are never made by the defendants.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 expanded the CFTC’s jurisdiction over transactions like these, and requires that such transactions be executed on or subject to the rules of a board of trade, exchange or commodity market, according to the complaint. This new requirement took effect on July 16, 2011. The complaint alleges that all of the defendants’ financed commodity transactions after July 16, 2011, were illegal. The complaint also alleges that the defendants defrauded customers in all of these financed commodity transactions.

David Meister, the CFTC’s Director of Enforcement stated: “Here is a prime example of how the Dodd-Frank Act provided the Commission with additional strong authority to go after wrong-doers, such as, as alleged in the complaint, individuals who prey on people looking to make retail investments in commodities like gold and silver. We will use this new authority to the fullest extent possible.”

In January 2012 the CFTC issued a Consumer Fraud Advisory (see Advisory under Related Links) regarding precious metals fraud, saying that it had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Consumer Fraud Advisory specifically warned that frequently companies do not purchase any physical metals for the customer, instead simply keeping the customer’s funds. The Consumer Fraud Advisory further cautioned consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.

In its continuing litigation against the defendants, the CFTC is seeking preliminary and permanent civil injunctions in addition to other remedial relief, including restitution to customers.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

United States of America v. Arnett L. Waters, Criminal No. 12-cr-10336-DJC (District of Massachusetts)

Defendant in SEC Action Charged by United States Attorney’s Office for the District of Massachusetts

The Securities and Exchange Commission recently announced that on October 17, 2012, the United States Attorney’s Office for the District of Massachusetts charged Arnett L. Waters, a resident of Milton, Massachusetts, with multiple schemes to defraud investors and business clients, as well as with obstruction of justice. Waters is also a defendant in an action filed by the Commission on May 1, 2012. The criminal information charges Waters with sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice.

According to the criminal information, from at least 2007 through 2012, Waters used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters is alleged to have raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012.

The criminal information also alleges that Waters engaged in a criminal scheme to defraud clients of his rare coins business using interstate commerce and the mails. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers’ behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information further alleges that Waters engaged in money laundering through two transactions totaling $77,000.

Finally, the criminal information alleges that Waters made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.

The filing of the criminal information follows the Commission’s complaint filed in federal court in Boston on May 1, 2012 against Waters and two of his companies, A.L. Waters Capital, LLC and Moneta Management. The Commission’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The Commission also alleges that Arnett Waters and Moneta Management violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Complaint also named Arnett Waters’ wife, Janet Waters, and a third entity controlled by Arnett Waters, Port Huron Partners, L.P., as relief defendants. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by the defendants and relief defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties against the defendants.

On May 3, 2012, the U.S. District Court in Massachusetts issued a preliminary injunction in the SEC’s action that, among other things, prohibits the civil defendants from continuing to violate certain federal securities laws and freezes the assets of the defendants.

On August 7, 2012, the Commission also filed a civil contempt motion alleging that Arnett Waters had willfully violated the Court’s preliminary injunction order. The Commission’s motion alleged that Waters had established an undisclosed bank account, transferred funds to that account, dissipated assets, and failed to disclose the bank account as required by the Court. On August 9, 2012, the United States Attorney’s Office for the District of Massachusetts filed a separate criminal information charging Waters with two counts of criminal contempt based on the same allegations. On October 2, 2012, Waters pled guilty to both counts of criminal contempt, and the Court ordered him detained pending sentencing on December 5, 2012.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

SEC Charges Family-Run Business Promising Investors Stake in Purported $11 Billion Gold Mine

July, 2012:

All that glitters is not gold. The Securities and Exchange Commission recently charged a father, son, and daughter with running a nationwide investment scheme that falsely promised investors whopping returns from a gold mining operation while their money was actually spent on family cars, jewelry, vacations, and vitamin supplements.

The SEC alleges that Harry Dean Proudfoot III of Mt. Vernon, Ohio, and his children Matthew Dale Proudfoot of Colbert, Wash., and Laurie Anne Vrvilo of Tigard, Ore., raised at least $2.7 million from approximately 140 investors in 23 states through their Portland, Oregon-based company 3 Eagles Research & Development LLC (3 Eagles). They told investors their company would extract gold worth more than $11 billion from gravel pits in central Ohio, and promised investors they could earn 35 times their initial investment. However, 3 Eagles did not even have rights to much of the property it claimed to be mining for gold, and the Proudfoots instead diverted investor money for personal use rather than the mining activities outlined in presentations to investors.

According to the SEC’s complaint filed in federal court in Portland, the scheme primarily occurred between September 2009 and October 2011. The Proudfoots sold investors “royalty units” in the purported gold mining project, claiming their money would be used to purchase mining equipment and conduct mining operations at two gravel pits. The Proudfoots falsely touted they had an expert geologist on the mining project. They solicited investors in a variety of ways, including through a Power Point presentation filled with misleading information. They also hired a securities broker named Dennis Ashley Bukantis of Denver, who is not registered with the SEC and assisted in the sale of royalty units in exchange for nearly $165,000 in commissions. Bukantis is charged along with the Proudfoots in the SEC’s complaint.

The SEC alleges that rather than using investor funds for gold mining equipment and operations, the Proudfoots siphoned off more than $1.1 million of investor money and misused 3 Eagles corporate accounts as their own personal piggy bank, leaving the company penniless and unable to pay the necessary expenses to get the Ohio mine into production. Among their illicit personal expenditures, the Proudfoots spent $80,000 on automobiles, $235,000 in personal travel, and upwards of $30,000 per year for vitamins and nutritional supplements.

According to the SEC’s complaint, after being served investigative subpoenas by the SEC and various state securities regulators in the fall of 2011, Harry Proudfoot was removed from the company and 3 Eagles represented it stopped selling royalty units. However, by December, Matthew Proudfoot was again selling investors a stake in 3 Eagles, this time calling them “membership interests” that would be used to move the Ohio mining project into production. Yet once again, much of the investor money was misused for personal expenses, including defense lawyers for each of the Proudfoots and 3 Eagles as well as Matthew Proudfoot’s bankruptcy payments and household bills.

The SEC’s complaint charges 3 Eagles, Harry Proudfoot, Matthew Proudfoot and Laurie Vrvilo with violations of Sections 5(a), 5(c) and 17 (a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5(a), (b) or (c) thereunder. The complaint also charges Bukantis with acting as an unregistered broker in violation of Section 15 (a) of the Exchange Act. The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil monetary penalties.

Historically, “Boiler Rooms” were associated with securities and commodity futures trading. Generally, a “boiler room” is defined as a place where high-pressure salespeople use banks of telephones to “cold” call lists of potential investors (known in the trade as sucker lists) in order to peddle speculative, even fraudulent investments. Generally, as part of the sales pitch, the caller initially relies on sales scripts based upon false and misleading information. If that does not work, it is not uncommon for the sales person to just make facts up with no knowledge as to whether what is being said is in fact true.

This post is being provided for education purposes only. It is not designed to be complete in all material respects. Thus, you should not rely upon this post as providing legal or investment advice. If you have any questions, you should contact a qualified professional.

For the most part, regulators have been able to shut down most securities and commodity futures boiler rooms. However, infrequently, you will read about another boiler room being shut down leaving in its wake a path of financial destruction for those individuals that were sucked in.

Recently, boiler rooms have made a come back in the precious metals area, especially by firms offering or pushing the use of leverage. Many of these firms were and are located in South Florida. Consequently, this post will focus on what is transpiring in the South Florida area.

In Florida, there are generally no licensing requirements that these firms currently have to satisfy to act as an introducing broker or a clearing/counter-party firm other than obtaining a telemarketing license from the Florida Department of Agriculture, if the firm is involved in telemarketing activities. Each precious metals firm and its telemarketers are supposed to file an application and obtain a license, from the state, whether the cold calls are to be made within or without of the state.

These applications will provide you with some basic information about the firms and their telemarketers and, if scripts are to be used in the calls, you can request a copy of the scripts. However, our experience has demonstrated that many times all of the scripts that are actually used are not filed with the state. For example, we just came across a situation where there was an objection book prepared and distributed to all of the brokers, which contained a rebuttal script for any major objection that a proposed customer came up with. The applications, licenses and scripts can be obtained from the Florida Department of Agriculture through a Freedom of Information Act request, which can be made on line.

In subsequent post relating to precious metals, we will provide you with information concerning how many of these companies actually work both pre and post Dodd Frank.

As indicated in an earlier Goldline International blog, a case seeking class action certification was filed in the United States District Court for the District of South Carolina, Greenville Division styled Tim Clark; Johanna Clougherty; Michael Clougherty; on behalf of themselves and all other similarly situated v. Goldline International, Inc., case no. 6:10-Civ-01884. The basis of the complaint is set forth in an earlier blog. The alleged underlying facts do not have a bearing on the importance of the court’s ruling on Goldline International’s Motion to Dismiss or Stay Proceedings and Compel Arbitration, which was granted. What the court’s order does demonstrate are the perils and risks of not only dealing with Goldline International but how far some firms will go to protect themselves and disadvantage their customers for their alleged wrongdoing.

The first issue or importance that was discussed by the court related to arbitration. Goldline International requires its clients to “read” and sign an Account and Storage Agreement (Account Agreement), which contains an Arbitration Agreement. Paragraph K of the Account Agreement states as follows:

Client agrees to arbitrate all controversies between client and Goldline including any of Goldline’s current or former officers, directors, employees, or agents arising out of or relating in any way to any transaction with Goldline, client’s account, any account that client causes to be opened in the future, or any service provided by Goldline, including but not limited to transactions of any kind made on client’s behalf. This Arbitration Agreement includes the determination of the scope or applicability of this agreement to arbitrate.

The parties agree that any arbitration will be administered by JAMS under its Comprehensive Arbitration Rules and Procedures, when the amount in controversy is greater than $250,000 and JAMS’s Streamlined Arbitration Rules when the amount in controversy is less than or equal to $250,000. The arbitration proceedings shall be kept in strictest confidence. The parties agree the exclusive venue for arbitration proceedings, including any arbitration hearing, will be Santa Monica, California. The parties further agree to the personal jurisdiction of the Superior Court, Los Angeles County, State of California, to enforce these arbitration provisions described in this Agreement. Client makes this arbitration agreement on his or her behalf and on behalf of client’s heirs, administrators, executors, successors and assigns and all persons claiming a beneficial interest in Client’s account.

The court, in ruling on Goldline International’s Motion to Compel Arbitration, determined that the Arbitration Agreement referenced above was enforceable. Consequently, any claim by a customer of Goldline International, no matter where the customer resides, must be heard, by arbitration, in Santa Monica, California. The expense and inconvenience associated with this provision is obvious.

The second issue that was discussed, by the court, was that the contractual provision requiring JAMS as the exclusive arbitration forum as determined by Goldline International was acceptable. This determination obviously prevented the customer from choosing more well known dispute resolution companies such as the American Arbitration Association.

Next, the court alluded to an argument made by the Plaintiffs that other provisions contained within the Arbitration Agreement were one sided because the limitations of remedies section limits Goldline International’s “liability in all claims” to the “amount actually paid by the client for the items in dispute less the items’ fair market value.” The Arbitration Agreement also requires that customers waive their rights in advance to claims for “indirect, incidental,k additional, punitive, exemplary or consequential damages even if Goldline has been advised of the possibility of such damages.”

Finally, the court noted that Section K-5 of the Arbitration Agreement, which requires that the client agree that any claim, arbitration, lawsuit, legal action, dispute or proceeding of any kind arising out of or relating to any transaction between client and Goldline is barred unless commenced within one year from the date of the transaction, is not unconscionable under California law.

The reader can draw his or her own conclusion as to whether or not they wish to do business with firms whose agreements are so one sided.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Centeral Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

WASHINGTON (October 20, 2010) – With gold prices reaching record highs, investors are increasingly turning to gold-related investments. The North American Securities Administrators Association (NASAA) today reminded investors to be cautious about jumping onto the gold bandwagon.

“The soaring price of gold has sparked a modern-day gold rush among investors eager to recover stock market losses. But it’s still a Wild West out there and dangers abound for prospective gold investors,” said David Massey, NASAA President and North Carolina Deputy Securities Administrator.

State and provincial securities regulators have issued an alert to help investors spot the risks of gold investments.

“It is a myth to say that gold is a safe investment. An investment in gold is not foolproof,” Massey said. “An investor needs to know his or her investment objectives. Gold may not provide long-term investment returns. Gold is a commodity, and, like other commodities, its price can fluctuate dramatically.”

Historically speaking, the value of gold-related investments fluctuates even more than the stock market. Gold often moves in reverse of stocks and bonds, so when stocks are down, gold may seem like a very tempting investment.

There are many ways to invest in gold, including buying actual gold or making gold-related market investments in mutual funds, exchange-traded funds and futures, as well as shares of gold mining companies. NASAA’s investor alert examines each of these options and explains what investors need to know about each before deciding to invest.

NASAA also advises investors to beware of gold investment scams. For example, in one typical scheme, a seller offers to sell actual gold bullion and then retain the investor’s gold in a “secure” vault with a promise to sell the gold for the investor as it gains in value. In many instances, the gold does not exist. In another typical scenario, a company encourages investors to cash out of their poor-performing investments to purchase gold, which may be nothing more than “fool’s gold.”

“Remember, if you are advised to cash out investments and roll funds into a different type of investment, make sure the person advising this is licensed by your state securities regulator,” Massey said.

Contact Us

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, 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.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.