March 19, 2014
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Defendants Gold Distributors Inc. (GDI) of Hallandale Beach, Florida, and its sole owner, Jordan Cain of Miami, Florida. The CFTC Complaint charges the Defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers.
According to the Complaint, between January 2012 and February 2013, GDI and Cain solicited retail customers by telephone and in person to buy physical precious metals, such as gold and silver, in off-exchange leverage transactions. Customers paid GDI a portion of the purchase price for the metals, and another entity, AmeriFirst Management, LLC (AmeriFirst), financed the remainder of the purchase price, while charging the customers interest on the amount they purportedly loaned to customers, the Complaint alleges.
Retail customers engaging in financed transactions with GDI were told that they were borrowing money to purchase precious metals, according to the Complaint. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), financed transactions such as those conducted by GDI, are illegal off-exchange transactions unless they result in actual delivery of metal within 28 days. The Complaint alleges that GDI’s customers never took delivery of the precious metals they purportedly purchased.
The Complaint further alleges that when GDI engaged in these illegal transactions it was acting as a dealer for metals merchant AmeriFirst, which the CFTC charged with fraud and other violations in federal court in Florida on July 30, 2013 (see CFTC Press Release 6655-13). As alleged in the CFTC Complaint against AmeriFirst and the Complaint in this case, neither GDI nor AmeriFirst purchased or held metal on the customers’ behalf. The Complaint alleges that Defendants’ customers thus never owned, possessed, or received title to the physical commodities that they believed they purchased. Cain, as the owner, operator and controlling person of GDI, is liable for GDI’s violations of the Commodity Exchange Act and CFTC Regulations, according to the Complaint.
In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution for the benefit of defrauded customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.
CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Christopher Giglio, Lenel Hickson, Jr., and Manal M. Sultan.
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CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.
Last Updated: March 19, 2014