The following is from the CFTC...
The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 13, 2013, it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Worth Group Inc. (Worth), as well as its owner, Andrew Wilshire, and its sole officer and director, Eugenia Mildner, all of Jupiter, Florida. The CFTC’s Complaint charges that Defendants defrauded retail precious metals customers and engaged in illegal, off-exchange retail commodity transactions from July 16, 2011, through the present.
According to the Complaint, Worth purported to sell physical metal, including gold, silver, platinum, and palladium, on a fully-paid basis, as well as on a financed basis, to hundreds of retail customers located throughout the United States. The Complaint alleges that Worth falsely represented to customers that, within 28 days of a customer’s purchase, Worth would deliver metal either to the customers directly or to a depository that would hold the metal for the customer. The Complaint alleges that pursuant to the scheme, Worth took in over $73 million in customer funds between July 18, 2011, and December 31, 2012.
As alleged, in connection with fully-paid transactions, customers paid the full purchase price to Worth for metals, having been told that Worth would deliver metal in return. The Complaint alleges that from at least August 15, 2011, through November 8, 2012, however, Worth did not actually deliver metal to most customers. Instead, rather than deliver actual metal, Worth’s typical practice after receiving customer money was to purchase metals derivatives in accounts owned by Worth. These derivatives purportedly “covered” customer transactions, but, contrary to Worth’s representations to customers, did not involve the purchase, transfer, or physical delivery of precious metals to Worth, let alone to its retail customers.
Retail customers engaging in financed transactions with Worth were told that they were borrowing money to purchase precious metals. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), a financed transaction such as that conducted by Worth is an illegal off-exchange transaction unless it results in actual delivery of metal within 28 days. The Complaint alleges that Worth often failed to make such delivery on a timely basis. Worth thus defrauded its customers and subjected them to undisclosed exposure to Worth’s credit, as they were left with only Worth’s commitment to deliver metal rather than the promised metal itself.
The Complaint further alleges that as persons controlling Worth’s precious metals operations, Wilshire and Mildner are liable for Worth’s violations of the Commodity Exchange Act and a CFTC Regulation.
In its continuing litigation against Defendants, the CFTC seeks preliminary and permanent civil injunctions in addition to other remedial relief, including restitution, civil monetary penalties, and disgorgement of ill-gotten gains.
This is the third action the CFTC has brought against entities and individuals who purport to buy precious metals and transfer ownership of those metals to customers, when insufficient metal, or no metal at all, is in fact purchased and delivered (see CFTC Press Releases 6447-12 and 6655-13).
David Meister, the CFTC’s Enforcement Director, stated: “The rules of the new Dodd-Frank law are simple: Companies and individuals who purport to sell precious metals to the retail public, and who say they are supplying real metal, must actually deliver real metal. As today’s case shows, along with previously filed Complaints against Hunter Wise Commodities, LLC and AmeriFirst Management, LLC, we will not hesitate to pursue wrongdoers who say they are providing investments in real precious metals to the American public when in fact they are providing nothing of the sort.”
The CFTC thanks the U.K. Financial Conduct Authority for its assistance in this matter.
The CFTC Division of Enforcement staff members responsible for this matter are Theodore Z. Polley III, Melissa Glasbrenner, William P. Janulis, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.