Release Number 7822-18
October 3, 2018
CFTC Charges Owner of Precious Metals Firm with Defrauding More than 130 Customers in Precious Metals Scheme
Washington, DC – The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Western District of Washington charging Defendant Aaron Michael Scott of Portland, Oregon, with fraud and misappropriation in connection with contracts of sale of precious metals, specifically gold and silver. Scott conducted his scheme through now-dissolved Washington-based company BMC Worldwide, Inc. (d/b/a Blue Moon Coins) (Blue Moon).
CFTC Director of Enforcement Comments
CFTC Director of Enforcement James McDonald, stated: “As alleged here, the Defendant defrauded more than 130 customers in a widespread scheme in which the Defendant solicited and accepted customer money, purportedly in exchange for precious metals, when in reality the Defendant simply lined his own pockets. This case shows the CFTC will work tirelessly to protect customers involved in these markets and to hold wrongdoers accountable. We thank the U.S. Attorney for the Western District of Washington and her Office for their assistance in this case.”
The CFTC Complaint alleges that from at least October 2013 through April 2014, Scott and Blue Moon defrauded more than 130 customers, throughout the United States and elsewhere, who purchased precious metals from Blue Moon. Scott and Blue Moon are alleged to have lied to their customers and misappropriated their funds, resulting in customer losses of more than $1.3 million.
As alleged, Scott and Blue Moon falsely claimed, among other things, that Blue Moon had precious metals in stock to fulfill customer orders or that Blue Moon would fulfill customer orders by purchasing precious metals from a supplier. According to the Complaint, Blue Moon did not maintain an inventory of precious metals sufficient to fulfill customer orders and, in many cases, Scott and Blue Moon made no effort to procure precious metals to fulfill customer orders. Instead, as alleged, Scott and Blue Moon simply misappropriated the vast majority of customer funds for their own use. Scott and Blue Moon allegedly used customer funds to pay Blue Moon’s operating expenses, invest in other businesses, pay unrelated debts, and refund other disgruntled customers or fulfill other customer orders in the nature of a Ponzi scheme. Scott and Blue Moon also attempted to prolong and hide their scheme by lying to customers about reasons their orders had not been fulfilled, the Complaint alleges.
In its continuing litigation against Scott, the CFTC seeks full restitution to defrauded customers, disgorgement of ill-gotten gains, permanent registration and trading bans, a civil monetary penalty, and a permanent injunction against future violations of federal commodities laws, as charged.
Related Criminal Indictment
On September 27, 2018, a federal grand jury indicted Scott on eleven counts of wire fraud and five counts of mail fraud in the U.S. District Court for the Western District of Washington. An initial appearance has been scheduled for October 4, 2018.
CFTC Division of Enforcement staff members responsible for this case are Peter Riggs, James Humphrey, Stephen Turley, Joyce Brandt, Christopher Reed, and Charles Marvine.
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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.
Also, before investing or trading with a firm, check the firm’s registration status and disciplinary history, if registered, with the National Futures Association. A company’s registration status can be found at: www.nfa.futures.org/basicnet.
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.