Mintco LLC to pay $340,000 for engaging in illegal off-exchange precious metals transactions


sec fines

The Commodity Futures Trading Commission (CFTC) announced that it has obtained three related Consent Orders of Permanent Injunction against Defendants Mintco LLC of Delray Beach, Florida, and its owners Stuart Rubin of Fort Lauderdale, Florida, and Richard Q. Zimmerman of Wellington Florida, finding that all Defendants engaged in illegal off-exchange precious metals transactions and further that Rubin and Mintco engaged in fraud with respect to these same precious metals transactions.

Sanctions

The Consent Orders, entered on December 19, 2017, by Judge Beth F. Bloom of the U.S. District Court for the Southern District of Florida, require Mintco to pay a $250,000 civil monetary penalty and Rubin and Zimmerman each to pay separate $45,000 civil monetary penalties. The Orders impose a three-year trading and permanent registration ban on Rubin and require Zimmerman, in the event he seeks to become a principal of a CFTC registrant, to provide promotional materials to the National Futures Association (NFA) for pre-review, in accordance with NFA Compliance Rule 2-29. The Orders also permanently prohibit the three Defendants from engaging in illegal, off-exchange precious metals transactions.

The Court’s Orders arise from a CFTC enforcement action filed on September 16, 2015, charging the Defendants with engaging in illegal and fraudulent off-exchange transactions in precious metals with retail customers and further alleged that Rubin and Zimmerman controlled Mintco and are liable as controlling persons for Mintco’s violations of the Commodity Exchange Act (CEA).

Precious Metals Never Delivered to Any Customers

The Consent Orders find that Mintco’s customers did not qualify as Eligible Contract Participants (ECPs) and that Mintco did not itself acquire and store any financed metal on behalf of its customers. The Court further found that Mintco never delivered precious metals to any customers with respect to the leveraged metals transactions made on behalf of Mintco’s customers. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), transactions of this nature are unlawful unless they result in actual delivery of metals within 28 days of the purchase or sale or the customers have sufficient net worth to be considered ECPs. As a result, the Orders find that that the Defendants’ precious metals transactions constituted unlawful off-exchange retail commodity transactions. The Mintco Consent Order also finds that Mintco was not registered as a Futures Commission Merchant, as required under the Commodity Exchange Act to offer those transactions.

Fraud by Mintco and Rubin

The Consent Orders further find that Mintco and Rubin defrauded retail customers by misrepresenting or omitting to disclose material facts to potential or existing retail customers, which included:

  1. misrepresenting the nature of the relationship between Mintco and retail customers by stating that Mintco would act in their best interest and as customer’s agent or representative;
  2. not adequately disclosing the break-even price of investments in precious metal in financed transactions; and
  3. omitting to inform customers that in excess of 80% of the retail customers’ investments in financed and fully paid stored precious metal failed to appreciate enough during the relevant period to cover the costs associated with the investment and earn a profit.

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.

The CFTC Division of Enforcement staff members responsible for this case are: Jon J. Kramer, Susan B. Padove, Brigitte Weyls, Joy H. McCormack, David A. Terrell, Scott R. Williamson, and Rosemary Hollinger.

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Mintco LLC to pay $340,000 for engaging in illegal off-exchange precious metals transactions

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