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Screenshot of a breaking news alert e-mail from Q2 2017
The U.S. Commodity Futures Trading Commission (CFTC) has announced that Judge Jose E. Martinez of the U.S. District Court for the Southern District of Florida entered a Consent Order against North American Asset Management, LLC (NAAM) of Fort Lauderdale, Florida, its owner and president Alexi Bethel of Miami, Florida, and its owner and managing director Steven Labadie of Lake Worth, Florida. The Order finds that NAAM, Bethel, and Labadie engaged in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis and requires them, jointly and severally, to pay restitution of $648,759.60 and a $977,430.47 civil monetary penalty.
The Order also imposes permanent trading and registration bans against NAAM, Bethel, and Labadie and prohibits them from further violating the Commodity Exchange Act (CEA), as charged.
The Order stems from a CFTC civil enforcement action filed against NAAM, Bethel, and Labadie on January 15, 2016, charging them with engaging in illegal, off-exchange precious metals transactions.
NAAM Collected at Least $2.5 Million from its Customers for Precious Metals Transactions, Including Commissions & Fees of over $648,700, the Order Finds
According to the Order, from March 2012 through at least March 2013, NAAM, by and through its employees, including Bethel and Labadie, solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals transactions. During that period, NAAM’s customers paid at least $2.5 million to NAAM in connection with precious metals transactions, and NAAM received commissions and fees totaling at least $648,759.60. The Order also finds that NAAM accepted customer orders and funds and therefore acted as a Futures Commission Merchant (FCM), without registering as such with the CFTC.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions, such as those conducted by NAAM, are illegal off-exchange transactions unless they result in actual delivery of metals 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 NAAM’s customers.
The Order further finds that NAAM executed the illegal precious metals transactions through Hunter Wise Commodities, LLC (Hunter Wise), Lloyds Commodities, LLC (Lloyds), and AmeriFirst Management, LLC (AmeriFirst). The CFTC filed an enforcement action against Hunter Wise and Lloyds in December 2012, and an enforcement action against AmeriFirst in July 2013, charging them and other defendants with engaging in illegal, off-exchange precious metals transactions, and charging Hunter Wise and AmeriFirst with fraud and other violations.
On September 17, 2013, the Court entered a consent order resolving the CFTC’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 CFTC’s claims against Lloyds, the court ordered Lloyds to pay over $5 million in restitution and penalties.
In its litigation against Hunter Wise, the CFTC secured summary judgment on its claims that Hunter Wise engaged in illegal precious metals transactions and was required to register as an FCM but failed to do so (see CFTC v. Hunter Wise Commodities, LLC, 1 F. Supp. 3d 1311 (S.D. Fla. 2014)). On April 15, 2014, the U.S. Court of Appeals for the Eleventh Circuit held that the CFTC’s jurisdiction under Section 2(c)(2)(D) of the CEA extends to the precious metals transactions at issue (see CFTC v. Hunter Wise Commodities, LLC, 749 F.3d 967 (11th Cir. 2014)). In addition, after a bench trial of all remaining claims, the district court entered a final order concluding that Hunter Wise fraudulently misrepresented the nature of the transactions and caused millions of dollars in customer losses.
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.