06 December 2012

CFTC alleges paper gold scam

The CFTC in this press release allege that the defendants "conducted illegal, off-exchange commodity transactions, and deceived customers in connection with financed transactions in precious metals." I've listed the defendants who have websites:

Hunter Wise Commodities
Lloyds Commodities
Blackstone Metals Group
Newbridge Alliance
United States Capital Trust

The key text from the press release (my emphasis):

According to the CFTC complaint, the defendants claim to sell physical metals, including gold, silver, platinum, palladium, and copper, to retail customers in retail commodity transactions. Under the defendants’ retail commodity transactions investment contract, customers allegedly make a down payment on certain quantities of physical metals, usually 25 percent of the total purchase price. Defendants allegedly claim to arrange loans for the balance of the purchase price, and advise customers that their physical metals will be stored in a secure depository.

The complaint further alleges that these statements were false, and that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions, according to the complaint. Defendants allegedly do not own or sell metals to customers; customers are charged storage and insurance fees on metals that do not exist; and are charged interest on loans, which are never made by the defendants.

I'm surprised the gold blogosphere hasn't picked up and run with this story, particularly the bits in bold. Maybe they have given up on the CFTC on finding scams so don't bother to check their site.

Interesting to look at the websites. They all look slick on the outside but what I find interesting is that their "about us" sections are mostly motherhood statements with little or no firm history, nor any directors or officers listed. That is a red flag to me.


  1. I wonder if any of these firms were complicit in the disinformation campaign designed to scare people away from SLV (and thus, into the frauds that they were perpetrating....)

    I'll leave that to the Screwtape Files crew to investigate...

  2. So many frauds to investigate ... so little time.

    KD, misinformation is almost impossible to trace back to perpetrators because it is easily outsourced but agreed .. a slick website costs very little to launch and coupled with a social media campaign could probably net a few easy dollars. Hopefully all metals newcomers start with the understanding there's a lot of due diligence required in any investment !!

  3. The nerve of these pissants! Who do they think there are, Morgan Stanley?

  4. I have come across your website because it was bringing some traffic. I represent Blackstone Metals Group. Let me answer or point out couple of the facts and you can ask me whatever question you have also. I don't want the company I work for to be put in this position. The product we provide to our clients is called financed metal. Basically how it works is you invest 25% of the total metal money value just like when you are buying a house with a mortgage. Blackstone stores those metals in vaults and depositories through Hunterwise. Metals is bought from 9 suppliers including Standard, Amtrak and the loan is provided by some of the major global banks including Credit Suisse and Deutschebank.
    Do you realize none of these companies listed on your blog stole one penny from their clients? Thats what you call fraud?
    CFTC already lost two cases similar to this in 2010 and 2011. CFTC believes they have jurisdiction over this industry, but what we do is not different than selling physical metals. There is no forward or futures contracts involved in any of our transactions. We just finance some of your purchase through major banks.
    CFTC stands for Commodities Futures Trading Commission not Commodities, Futures Trading Commission. If they were to have authority over us they would have the authority over every pawn shop and mortgage business in the nation.
    Hunterwise's lawyers are ex-CFTC prosecutors and they feel very confident about this case.
    It feels like government is trying to get its stake from precious metals industry.
    Just read our clients' testimonials maybe it will help you not to judge our company without knowing what's going on.

  5. Anon from Blackstone Metals:

    I have some questions for you:

    Are you r clients buying allocated metal? Are they given lists of their allocated bar numbers?

    Why do you think that the CFTC says you do not purchase any physical metals?

    If you're buying unallocated paper metals products for your clients, then are you charging them storage and insurance fees? If not, why does the CFTC think that you are?

    do you have a link to the official detailed complaint from the CFTC? or is the CFTC press release the only public disclosure?


  6. To Blackstone anonymous,

    Happy to report your side of the story. I can't find any email contact, just a phone number which I can call Monday. Otherwise email me at perthmint.com.au, to bron.suchecki

    Kid Dynamite's questions are a good starting point. I would also want to know if you business is listed in a state that has adopted the Model State Commodity Code, which I understand requires bullion sellers to deliver metal to buyers withing 30 (or maybe 60) days.

    Precious metals do exist in a grey area legally in many countries as they are real property (like a car) but also can be considered a financial product/investment, so whether financial market laws or just consumer credit laws applies can differ between jurisdictions.

  7. Definitely following this one!


  8. http://www.marketwatch.com/story/hunter-wise-commodities-categorically-denies-cftc-claims-2012-12-12