CFTC charges Fla. firm with precious metals fraud

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it charged precious metals firm American Precious Metals, LLC(APM) of Deerfield Beach, Fla., and its founders and principals, Sammy J. Goldman of Delray Beach, Fla., and Harry Robert Tanner, Jr. of Lake Worth, Fla., with fraud in connection with offering, purchasing, selling or delivering gold, silver, platinum and palladium to U.S. retail customers on a leveraged basis. The CFTC’s lawsuit also alleges that the defendants violated the Commodity Exchange Act’s prohibition against selling palladium to customers on a leveraged basis. APM has never been registered with the CFTC.

The CFTC complaint was filed under seal on May 10, 2011, in the U.S. District Court for the Southern District of Florida. Specifically, the complaint alleges that the defendants “engaged in a massive fraudulent scheme” and, from at least July 1, 2007, APM, through its agents and employees, acting at the direction of Tanner and Goldman, purportedly purchased more than $23 million of precious metals for customers in their “leverage program.” The program allegedly requires customers to make a down payment of as little as $5,000 to APM for certain quantities of physical precious metals. APM also allegedly claims to finance up to 80 percent of customers’ purchases and store customers’ physical metals in a secure depository.

According to the complaint, these statements are false. In reality, APM allegedly does not purchase or sell any precious metals for customers, does not arrange loans for customers to purchase physical metals and does not arrange for storage in any depository. Instead, after charging customers commissions of approximately 40 percent of their initial investment, APM allegedly pools the remaining funds and sends a portion of that money to a third party. The third party does not purchase any physical precious metals, provide loans or arrange for metals storage on behalf of any APM customer, according to the complaint.

The complaint also charges APM with making misrepresentations and omissions of material fact related to the profitability of and risks associated with the leverage program.

In its continuing litigation, the CFTC seeks preliminary and permanent injunction orders against the defendants, disgorgement of ill-gotten gains, civil monetary penalties and trading and registration bans.

This represents the third case in the past seven weeks filed by the CFTC against companies and company owners who purport to offer retail investors the opportunity to purchase physical precious metals on a leveraged basis. (See CFTC Press Release 6014-11, March 30, 2011, Kastle & Hawke, Inc., et al. and CFTC Press Release 6029-11, April 28, 2011, 20/20 Trading Company, Inc., et al. Also, see the CFTC’s Precious Metals Fraud Advisory.)

The CFTC thanks the Florida Office of Financial Regulation, the South Florida Securities and Investment Fraud Initiative, the Federal Trade Commission (FTC) and the United Kingdom Financial Services Authority for their assistance. The FTC also announced today that it charged American Precious Metals, LLC, Harry R. Tanner, Jr., and his wife Andrea Tanner with fraud in violation of the Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule for promising customers that the leveraged investments were certain to make money and had very little risk. In that action, the FTC sought and obtained a temporary restraining order freezing defendants’ assets and appointing a temporary receiver to protect and preserve customer funds (see link to the FTC Press Release, May 17, 2011).

The CFTC Division of Enforcement staff responsible for this action are Carlin Metzger, Joseph Konizeski, Stephanie Reinhart, Jennifer Smiley, Judith McCorkle, Mary Kaminski, Scott Williamson, Rosemary Hollinger and Richard Wagner.

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