Release #4219-98 (Civ. 97-4443)

For Release: December 22, 1998


CFTC Charged Samaru with Fraudulent Sale of Illegal Futures Contracts

WASHINGTON – The Commodity Futures Trading Commission (CFTC) announced today that on December 15, 1998, the Honorable William Matthew Byrne, Jr. of the U.S. District Court for the Central District of California entered a consent order of permanent injunction enjoining Linton Samaru (Samaru) of Venice, California from violating sections 4(a) and 4b(a)(2) of the Commodity Exchange Act (CEA) and from soliciting new customers or customer funds for futures trading. The court also found that Samaru engaged in off-exchange futures transactions in the amount of $882,005.98, and ordered briefing to determine the appropriate amount of a monetary judgment to be entered against Samaru as a result of these transactions.

The CFTC filed a two-count injunctive complaint on June 18, 1997, charging that Samaru, along with C.O.M. Consultants, Inc. d/b/a Golden State Bullion (Golden State); Richard David Otto (Otto), Golden State’s president and owner; and Golden State telemarketers Bruce Michael Paine (Paine) and Fred Ronald Williams (Williams) had engaged in fraudulent telemarketing of highly-leveraged investments in platinum, gold, silver, and palladium. (See CFTC News Release #4030-97, June 23, 1997). Specifically, the CFTC complaint charged that the defendants violated section 4(a) of the CEA by offering and selling illegal futures contracts and section 4b of the CEA by cheating and defrauding customers through false claims concerning the likelihood of profit and the risk of loss. On June 19, 1997, the court froze the assets of all the defendants, and appointed a receiver to take control of Golden State and marshal the company’s assets.

According to the complaint, Golden State required customers to pay an initial investment that represented a 20 or 25 percent down payment on the purchase of precious metal, and an off-shore financial institution would loan customers the balance of the purchase price of the metal. Golden State allegedly told customers that they would never have to receive the metal they had supposedly purchased; instead, the metal would be physically stored at the off-shore financial institution as collateral for the customer’s loan. Golden State telemarketers allegedly claimed that their precious metals investment program entailed little or no risk and that an impending strike at a South African platinum mine would cause the price of platinum to increase to between $600 and $700 per ounce, providing investors with a return of three to four times their investments in the next two to three months. In fact, customers consistently lost the bulk of their investments, according to the complaint.

The court previously entered consent orders barring defendants Golden State, Otto, and Paine from soliciting customers or customer funds in connection with futures trading, and ordering Golden State and Otto to pay restitution to Golden State customers. The court also previously entered a default judgment against defendant Williams, which permanently bars him from soliciting customers or funds in connection with futures trading and orders him to pay restitution to Golden State investors.

Resolution of Monetary Judgment Against Samaru and Paine Remains to be Decided

The court will decide the amount of the monetary judgment against Linton Samaru after further briefing and a hearing. The CFTC’s request for a monetary judgment as to defendant Paine also remains to be decided. After resolution of these issues, a Redress Agent will make a pro rata distribution to Golden State customers of funds recovered through this action.

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