September 23, 2014
CFTC Orders Georgia Resident Todd Young and His Company, Young Scott & Associates, to Cease Illegal Fictitious Precious Metals Sales
Order includes restitution award and prohibitions against future activity
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Todd Young, a resident of Atlanta, Georgia, and his company, Young Scott & Associates (YSA), for engaging in illegal, off-exchange precious metals transactions.
The CFTC Order requires Young and YSA jointly to pay restitution totaling $162,487 to their customers. In addition, the Order imposes permanent registration and trading bans on Young and YSA.
As explained in the Order, financed transactions in commodities with retail customers, like those engaged in by Young and YSA, must be executed on or subject to the rules of an exchange approved by the CFTC. The CFTC Order finds that from May 2012 through April 2013, YSA and Young solicited retail customers to engage in financed precious metals transactions, which were executed through Hunter Wise Commodities, LLC (Hunter Wise). Young represented that a customer could purchase precious metals with just a deposit, such as 25 percent, and that the customer would receive a loan for the remaining 75 percent, according to the Order. In addition to interest on the “loan,” the customer also had to pay a commission and a mark-up on the total value of the metal. If the customer agreed to the transaction, the customer sent the deposit, commission, and mark-up to YSA, and the funds were ultimately transferred to Hunter Wise. In return, Hunter Wise paid YSA a portion of the customer commissions and fees. Neither YSA nor Hunter Wise bought, sold, loaned, stored, or transferred any physical metals for these transactions. Neither YSA nor Hunter Wise actually delivered any precious metals to any customer. Notwithstanding the fact that no physical metal was involved, YSA’s transactions were illegal because they were not executed on a registered exchange.
On December 5, 2012, the CFTC sued Hunter Wise in federal court in Florida charging it with engaging in the same type of illegal, off-exchange precious metals transactions engaged in by YSA through Hunter Wise, and fraud (see CFTC Press Release and Complaint 6447-12, December 5, 2012). On February 19, 2014, the court found that Hunter Wise had no actual metal to deliver to customers and held that Hunter Wise engaged in illegal precious metals transactions and was required to register as a futures commission merchant but did not do so and therefore violated Sections 4(a) and 4d of the CEA (see CFTC v. Hunter Wise Commodities, LLC, et al., 12-81311-CIV (Order on the Parties’ Motions for Summary Judgment)). On April 15, 2014, the U.S. Court of Appeals for the Eleventh Circuit affirmed the court’s issuance of a preliminary injunction and held that the Commission’s jurisdiction under Section 2(c)(2)(D) of the CEA extends to the precious metals transactions at issue in the case and that no exception to the Commission’s jurisdiction applied. And, on May 16, 2014, after a bench trial on the remaining claims, including fraud, the court entered an order finding that Hunter Wise fraudulently misrepresented the nature of precious metals transactions that resulted in millions of dollars in customer losses (see CFTC Press Release 6935-14).
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 case are Kevin S. Webb, Michelle Bougas, James H. Holl, III, Rick Glaser, and Gretchen L. Lowe.
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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: September 23, 2014