By Commodity Futures Trading Commission....
The U.S. Commodity Futures Trading Commission (CFTC) on Wednesday, November 18, announced that a federal court in Miami, Florida issued a Consent Order against Defendants Sentry Asset Group, LLC d/b/a Sentry Asset Management, LLC (SAG) of Boca Raton, Florida, and its owner, manager, and controlling person John Pakel of Boynton Beach, Florida. The Order, entered by Judge Beth Bloom of the U.S. District Court for the Southern District of Florida, requires SAG and Pakel jointly to pay a $100,000 civil monetary penalty and restitution of $278,767. The Order also imposes permanent trading and registration bans on the Defendants and prohibits them from further violations of the Commodity Exchange Act, as charged.
According to the Order, since at least March 2012 and continuing through at least July 2013, Sentry Asset Group, by and through its employees, including Pakel, solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals transactions. During that period, the Order finds that SAG’s customers paid approximately $1.1 million to Sentry Asset Group in connection with precious metals transactions and that SAG received commissions and fees totaling at least $278,767 in connection with these precious metals transactions.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions such as those conducted by Sentry Asset Group are illegal off-exchange transactions unless they result in actual delivery of metal within 28 days. The Order finds that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of SAG’s customers.
The Order further finds that SAG executed the illegal precious metals transactions through Lloyds Commodities, LLC, Hunter Wise, LLC and AmeriFirst Management LLC. The CFTC filed enforcement actions against, among others, Lloyds and Hunter Wise in December 2012 and AmeriFirst in July 2013, charging each with engaging in illegal, off-exchange precious metals transactions, and charging AmeriFirst and Hunter Wise with fraud and other violations.
On September 18, 2013, the court entered a consent order resolving the Commission’s claims against AmeriFirst, finding it liable for illegal, off-exchange precious metals transactions and fraud.
On February 5, 2014, in a consent order resolving the Commission’s claims against Lloyds, the court ordered Lloyds to pay over $5 million in restitution and penalties.
On February 19, 2014, the court found that Hunter Wise had no actual metal to deliver to customers and held that Hunter Wise engaged in illegal precious metals transactions and was required to register as a futures commission merchant, but did not do so, and therefore, violated Sections 4(a) and 4(d) of the Commodity Exchange Act (CEA) (see CFTC v. Hunter Wise Commodities, LLC, et al., 12-81311-CIV (Order on the Parties’ Motions for Summary Judgment)).
On April 15, 2014, the U.S. Court of Appeals for the Eleventh Circuit affirmed the court’s issuance of a preliminary injunction and held that the Commission’s jurisdiction under Section 2(c)(2)(D) of the CEA extends to the precious metals transactions at issue in the case and that no exception to the Commission’s jurisdiction applied.
On May 16, 2014, after a bench trial on the remaining claims, including fraud, the court entered an order finding that Hunter Wise fraudulently misrepresented the nature of precious metals transactions that resulted in millions of dollars in customer losses.
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 action are Eugenia Vroustouris, Michael Loconte, James H. Holl, III, and Rick Glaser.
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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.
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.