CFTC News Release 4417-00
For Release July 5, 2000
COURT PRELIMINARILY ENJOINS DEFENDANTS FROM CONTINUING TO OPERATE IN A CASE ALLEGING AN $18 MILLION FRAUDULENT PRECIOUS METALS SCHEME
Court Found that Defendants, Including IBS Inc. and IMC Trading Inc., Fraudulently Solicited Customers From Offices In Four States
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on June 20, 2000, the Honorable Judge Richard L. Voorhees, United States District Judge for the Western District of North Carolina, issued a preliminary injunction against defendants charged with engaging in an $18 million commodities scheme. The complaint filed by the CFTC on March 13, 2000, charged the defendants with fraudulently telemarketing illegal futures contracts in such commodities as silver, palladium, and heating oil (see CFTC News Release 4382-00, March 20, 2000).
The preliminary injunction enjoins the following defendants from soliciting customers or accepting funds for commodities trading: IBS, Inc., a North Carolina corporation; IMC Trading, Inc., separately incorporated in North Carolina, Nevada, and Arizona; Joe Miller Company d/b/a IMC Trading, a California corporation; Mazuma Trading Group, Inc. d/b/a Pinpoint Marketing, Ltd., a Florida corporation (corporations collectively referred to as the IMC Common Enterprise); and three individuals -- Alan Stein, Joseph Finateri and Michael Temple.
The preliminary injunction also continued an asset freeze against these defendants that the court had issued as part of a March 13, 2000, ex parte statutory restraining order and appointed a receiver to take control of the corporate defendants.
In his opinion supporting the issuance of the preliminary injunction, Judge Voorhees found, based on the evidence currently before the court "a clear and long-standing scheme on the part of Defendants to cheat and defraud customers through the use of various corporate entities designed to put an apparently legitimate face on their conduct."
In pursuing this scheme, the court found that "Defendants have solicited members of the general public to purchase futures contracts for precious metals and other commodities upon highly deceptive and misleading representations as to huge potential profits while failing to disclose the significant costs of associated account, storage, and other up-front fees or otherwise disclose in an appropriate and timely manner the substantial risks involved in speculating on commodity prices."
Additionally, the court concluded that the corporate defendants operated as a "common enterprise" and sold futures contracts that were not subject to the rules of properly designated contract markets.
According to the court, IMC Trading, Inc. in Nevada and North Carolina offered customers "the ability to invest in precious metals with a 20-percent down payment and a loan for the remaining balance, first through Amitex Investment Services and later through International Bullion Services, Bahamas."
The court noted that once customers made their initial investments, they received calls from the two IMC Trading entities "on a regular basis encouraging them to invest additional money in silver, upon representations that silver was at or near historic lows and would rebound sharply over a short period of time, that the stock market was extremely overpriced and that a correction would occur soon, that dollar and interest rate fears would drive silver prices higher, that the company representative had just purchased silver for his own account, and that Warren Buffet's interest in silver would drive up prices significantly." When an equity call was issued on a customer's account, requiring the customer to send additional funds or liquidate the position, IMC Trading, Inc. in Nevada, and later in North Carolina, urged customers to invest additional funds to capitalize on imminent spikes in the market forecast by the firms' telemarketers, according to the court.
The court also found that the CFTC's evidence established that several million dollars in customer funds were transferred between a number of foreign and domestic bank accounts held by the various defendants and other parties named in the CFTC's complaint as "relief" defendants: International Bullion Services, Inc., a Bahamas Corporation; Kimberlynn Creek Ranch, Inc.; Kingsfield Racing, Inc.; F. X. & B, L.L.C.; A. J. S. Enterprises, Inc.; Samuel Kingsfield; and Pamela Kingsfield. According to the court, the CFTC's evidence established that "various Defendants and Relief Defendants diverted customer funds to pay for personal expenses and that several persons held credit cards drawn off IMC accounts."
CFTC Is Seeking Permanent Injunctions in its Continuing Litigation of this Case
In its continuing litigation against the defendants, the CFTC is seeking permanent civil injunctions in addition to other remedial relief including restitution to customers. The CFTC is further seeking disgorgement of funds transferred to International Bullion Services, Inc., Kimberlynn Creek Ranch, Inc., Kingsfield Racing, Inc., F. X. & B L. L. C., A. J. S. Enterprises, Inc., Samuel Kingsfield, and Pamela Kingsfield.
CFTC Issues Consumer Alert Regarding Precious Metals Investment Schemes
In a separate matter, the CFTC also announced today that it filed a complaint charging National Bullion and Coin, Inc., d/b/a/ National Bullion & Coin Services, Inc., Capital Credit Management & Finance, Inc., Joseph B. Flanigan and Lawrence Colman with fraudulently telemarketing illegal futures contracts in precious metals and other commodities (see CFTC News Release 4415-00, July 5, 2000). In light of its recent enforcement activity in this area, the CFTC also issued today a consumer advisory alerting consumers to be wary of claims of high profits and low risk from such precious metals investments and providing warning signs of phony sales pitches and other commodity "come-ons" (see CFTC News Release 4416-00, July 5, 2000).