August 7, 2014
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 4, 2014, Judge Beth Bloom of the U.S. District Court for the Southern District of Florida entered a Consent Order for Permanent Injunction against Florida resident Lawrence Scott Spain and his company, Palm Beach Capital LLC (PBC) (the Defendants), for engaging in illegal, off-exchange precious metals transactions. The Order requires the Defendants, jointly and severally, to pay restitution of $526,960; imposes permanent trading, solicitation and registration bans against them; and prohibits them from engaging in illegal, off-exchange retail commodity transactions, as charged. Spain’s last known address was in Boca Raton, Florida.
The court’s Order stems from a CFTC Complaint filed on May 13, 2014, that charged the Defendants with engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis (see CFTC Press Release and Complaint 6931-14). The Complaint further alleged that Spain, as controlling person for PBC, is liable for PBC’s violations of the Commodity Exchange Act.
The Order provides that Melanie Damian, Esq. is responsible for collecting restitution and making any distributions to PBC’s customers. Ms. Damian was appointed by the U.S. District Court for the Southern District of Florida as Special Monitor, Corporate Manager and Equity Receiver in the CFTC’s enforcement action against, among others, Lloyds Commodities, LLC and certain of its associated entities (referred to collectively as Lloyds Commodities) and Hunter Wise Commodities, LLC and certain of its associated entities (referred to collectively as Hunter Wise) (see CFTC Press Releases 6447-12, December 12, 2012 and 6935-14, May 22, 2014). The Order finds that PBC transacted the illegal precious metals transactions through Lloyds Commodities and Hunter Wise.
The Order further finds that, since at least July 16, 2011 and continuing through at least August 2012, PBC, by and through its employees including Spain, solicited retail customers by telephone and on PBC’s website, to engage in off-exchange leveraged, margined, or financed precious metals (including gold, silver, platinum and palladium) transactions. During that period, according to the Order, approximately 39 of PBC’s customers paid at least $1.35 million to PBC in connection with precious metals transactions. The Order finds that these customers lost at least $1.25 million of their funds to trading losses, commissions, fees, and other charges by PBC and other companies, and that PBC received commissions and fees totaling $526,960 in connection with these precious metals transactions.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions such as those conducted by PBC, are illegal off-exchange transactions unless they result in actual delivery of the commodity involved within 28 days. The Order finds that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of PBC’s customers.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this action are R. Stephen Painter, Jr., Michael C. McLaughlin, David W. MacGregor, 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: August 7, 2014