The US Commodity Futures Trading Commission has filed a civil complaint against California-based defendants Ryan A. Nassbridges, American Bullion Exchange ABEX Corp. and American Bullion Exchange LLC, charging them with fraudulent solicitation and misappropriation in connection with precious metals futures and options fraud.
The CFTC complaint, filed on 8 December 2010, alleges that the defendants solicited approximately USD5.5m from at least 80 customers to invest in precious metals, including gold, palladium, platinum, silver bullion and gold and silver coins.
In soliciting participants, the defendants allegedly fraudulently represented that (1) they would only invest participants’ funds in bullion and coins, (2) participants’ funds would be maintained in segregated accounts, (3) defendants’ investments were insured against loss, (4) defendants would use stop-loss orders to protect participants from any loss of their principal and (5) Ryan Nassbridges was registered with the CFTC.
Contrary to the represented investment strategy, defendants allegedly used a significant portion of participants’ funds to trade commodity futures and options, including gold and silver futures, and sustained overall trading losses of approximately USD2.2m.
However, the defendants allegedly never disclosed to participants that they would trade commodity futures and options and were sustaining significant trading losses. Defendants also never disclosed the risks of trading commodity futures and options, according to the complaint.
Defendants allegedly misappropriated millions of dollars of participants’ funds to pay personal expenses and to pay earlier investors purported profits with more recent participants’ funds, as is typical of a Ponzi scheme.
Nassbridges also allegedly used misappropriated participant funds to pay approximately USD586,100 in mortgage payments, approximately USD305,000 in credit card payments, approximately USD90,100 in car payments and more than USD157,700 in cash withdrawals, according to the complaint.
Nassbridges’ wife, Bita Nassbridges, and other companies he controlled are named as relief defendants for allegedly receiving funds as a result of the defendants’ fraudulent conduct and have no legitimate entitlement to those funds.
The CFTC complaint further alleges that Nassbridges tried to conceal his fraud by giving misleading and false testimony.
The CFTC’s complaint seeks civil monetary penalties, trading and registration bans against the defendants and disgorgement of ill-gotten gains from the relief defendants.
