May 14, 2015
CFTC Orders Double Eagle Enterprises, LLC and Eric Arlt to Pay More than $700,000 in Restitution and a Civil Monetary Penalty in Precious Metals Enforcement Action
Order also Permanently Bars Respondents from Trading on CFTC-Regulated Markets
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Double Eagle Enterprises, LLC, Double Eagle Metals (collectively Double Eagle), and its owner Eric Arlt, all of Charlevoix, Michigan (together Respondents). The Order charged the Respondents with illegally offering off-exchange financed transactions in precious metals with retail customers, and failure to register as a Futures Commission Merchant (FCM) with the CFTC, as required.
The CFTC Order requires the Respondents jointly to pay restitution of $611,154 to their customers and a $100,000 civil monetary penalty. The Order also requires the Respondents to cease and desist from further violations of the Commodity Exchange Act, as charged, and prohibits them from trading on or pursuant to the rules of any registered entity.
The Illegal Transactions
Specifically, the CFTC Order finds that, from July 2011 through May 2013, the Respondents solicited retail customers, generally by telephone, to buy and sell physical precious metals, such as gold and silver, in off-exchange, leveraged transactions and failing to properly be registered. According to the Order, customers paid a percentage of the purchase price for the metals, and Respondents purportedly financed the remainder of the purchase price, while charging customers interest on the amount borrowed.
The CFTC Order states that financed, off-exchange transactions with retail customers have been illegal since July 16, 2011, when certain amendments of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 became effective. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by Respondents must be executed on, or subject to, the rules of a board of trade that has been approved by the CFTC. Since Respondents’ transactions were done off-exchange, with customers who were not eligible contract participants, they were illegal, the Order finds.
Failure to Register
The Order also states that it unlawful for any person to engage as a FCM, unless such person is registered with the CFTC as an FCM and such registration has not expired or been suspended or revoked. Double Eagle acted as an FCM by soliciting and accepting customers’ orders for financed precious metals transactions and, in connection with those transactions, accepting at least $1 million from those customers, including customers who were not eligible contract participants. As such, Double Eagle acted as an unregistered FCM.
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 matter are Michelle Bougas, James H. Holl, III, and Rick Glaser.
CFTC’s Precious Metals Fraud Advisory
In January 2012, the CFTC issued a the Precious Metals Consumer Fraud Advisory regarding precious metals fraud, saying that it had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Precious Metals Fraud Advisory specifically warns that frequently companies do not purchase any physical metals for the customer, instead simply keeping the customer’s funds. The Advisory further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.
In addition, the CFTC has issued several other customer protection Fraud Advisories that provide the warning signs of fraud. 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: May 14, 2015