February 21, 2019
Federal Court Imposes $15.7 Million Civil Penalty and Lifetime Trading Ban against Precious Metals Dealer and his Company in CFTC Anti-Fraud Action
In 2015, the CFTC Charged California Resident Hannes Tulving, Jr. and His Firm with Misappropriation and Fraudulent Solicitation in a Precious Metals Scheme that Defrauded at Least 381 Customers Nationwide
Washington, DC — The Commodity Futures Trading Commission (CFTC) announced today that Judge Robert J. Conrad Jr. of the U.S. District Court for the Western District of North Carolina entered a Supplemental Consent Order (Supplemental Order) against Defendants Hannes Tulving, Jr. (Tulving) of Newport Beach, California, and his company The Tulving Company, Inc., finding that they fraudulently solicited customers in connection with precious metals transactions, misappropriated customer funds, and concealed their fraud with false statements that the customer accounts were profitable.
The Supplemental Order, issued November 29, 2018, requires the Defendants to pay, jointly and severally, a civil monetary penalty of $15,761,432. The Supplemental Order follows the Court’s January 5, 2016 Consent Order of Permanent Injunction (Consent Order), which imposed permanent trading and registration bans against the Defendants, and prohibited them from committing further violations of the Commodity Exchange Act and CFTC Regulations, as charged.
Criminal Judgments Entered against Defendants
The Supplemental Order also follows the Court’s May 18, 2016, criminal judgments against both Defendants in a related criminal proceeding after they each pleaded guilty to one count of wire fraud and aiding and abetting in violation of 18 U.S.C. §1343 and 2. (See U.S.A. v. Tulving et al, No. 3:15-cr-00115-MOC (W.D.N.C. 2016.) The Court sentenced Tulving to 30 months in prison and ordered that Tulving and Tulving Company shall be jointly and severally liable for payment of restitution in the amount of $15,761,432.63 to specified victims.
Both the Consent and Supplemental Orders arise from a CFTC enforcement action filed on September 11, 2015, charging the Defendants with fraudulently offering contracts of sale of commodities in interstate commerce, namely, contracts for the sale of gold, silver, platinum, and palladium bullion and coin (precious metals), and misappropriating customer funds for improper and unauthorized uses, including for the Defendants’ own financial benefit (see CFTC Complaint and Press Release 7228-15, September 11, 2015).
The Consent Order found that from in or about August 2013 through in or about January 2014, Defendants represented to members of the public that Tulving Company was a large, stable, and highly reputable precious metals firm that delivered precious metals to customers. As a result, at least 381 persons from locations throughout the United States submitted orders with Tulving Company for the purchase of more than $150 million in precious metals; however, Defendants fraudulently failed to purchase precious metals with at least $15 million of the customers’ funds. Defendants knew that their representations to some of the customers regarding the purchase of precious metals were false because they did not purchase precious metals on behalf of some customers and, in fact, misappropriated a portion of customer funds by, among other things, using customer funds to fulfill other customers' orders, paying debts of the company, and also returning the money to previous customers who did not receive their coins, all in furtherance of keeping the business going.
The Court further found that Tulving acted as the sole controlling person and agent of Tulving Company. He was the sole shareholder and president of Tulving Company, and he was the sole person responsible for making business decisions on behalf of Tulving Company and controlled the operations of the Company.
The CFTC cautions that Orders requiring repayment of funds to victims may not result in the recovery of any 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 Luke B. Marsh, Richard Foelber, Dmitriy Vilensky, and Paul G. Hayeck.
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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.