In his 58-page Opinion and Order, Judge Donald M. Middlebrooks of the U.S. District Court, Southern District of Florida, found that Jager and Martin knowingly defrauded more than 3,200 retail customers for more than 16 months, between July 2011 and February 2013. The Court found that Jager and Martin’s fraudulent conduct was “repeated, callous and blatant.”
According to the Order, Hunter Wise orchestrated a multi-level marketing scheme in which so-called retail dealers served a sales function for Hunter Wise, soliciting customer accounts. The dealers advertised and claimed that they sold physical metals, including gold, silver, platinum, palladium, and copper, to retail customers on a financed basis, and forwarded customer funds to Hunter Wise, whose identity was not disclosed to the customers.
As explained in the Order, using marketing materials and training provided to them by Jager, Martin and other Hunter Wise employees, the dealers claimed to arrange loans for the purchase of physical metals, and advised customers that their physical metals would be stored in a secure depository.
The Order finds that customers were then charged “exorbitant interest” on the purported loans and storage fees for the metal they thought they had purchased. In fact, the Order finds that neither Hunter Wise nor any of the dealers purchased any physical metals, arranged actual loans for their customers to purchase physical metals, or stored physical metals for any customers participating in their retail commodity transactions – in other words, there was “no metal at the end of the rainbow.” According to the Order, over 90 percent of the retail customers lost money.
The Court found that Jager and Martin knew that they were defrauding customers and violating the law. “[Jager and Martin] purposefully decided to risk criminal and civil liability by continuing Hunter Wise’s fraudulent and illegal operations. … The house cannot win when, in violation of the law, the game is rigged.”
The Court further found Martin and Jager’s proferred excuses for their conduct “implausible,” “disingenuous” and “highly unreasonable.” For example, the Court noted that Hunter Wise’s attorneys had advised them to change their business or shut down, so that Jager and Martin were keenly aware of the choices available to them and the possible criminal consequences of continuing to operate, to the extent that Martin wrote in an email to Jager, “With any luck we will have adjoining cells.”
In considering the appropriate penalties, the Court noted that the fraudulent scheme was “egregious and recurrent” and “calculated to deceive retail customers.” The Court held that the likelihood of future violations was “strong” given that Jager and Martin did not acknowledge any wrongdoing. Further, the “systematic and pervasive nature” of the fraud necessitated full restitution for all customers who lost money between July 16, 2011 and February 25, 2013.
In a separate Order, the District Court entered default judgments against C.D. Hopkins Financial Group, LLC, Hard Asset Lending Group, LLC, and their principal, Chadewick Hopkins (CD Hopkins Defendants), and Blackstone Metals Group, LLC and its principal Baris Keser (Blackstone Defendants).
CD Hopkins Defendants were ordered to pay $1,158,278.78 in restitution and $3,474,000 in civil penalties. Blackstone Defendants were ordered to pay $617,818.93 in restitution and $1,853,000 in civil penalties.
The CFTC Division of Enforcement staff members responsible for this action are Carlin Metzger, Joseph Konizeski, Heather Johnson, Nancy Hooper, Jeff LeRiche, Peter Riggs, Jennifer Chapin, Thaddeus Glotfelty, Stephen Turley, Brigitte Weyls, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
The CFTC thanks the Florida Office of Financial Regulation, the Florida Department of Agriculture and Consumer Services, and the United Kingdom Financial Conduct Authority for their assistance in this matter.