The US Commodity Futures Trading Commission (CFTC) has filed a civil injunctive enforcement action against Vertical Integration Group, Richard V Morello and Junior Alexis.
The CFTC complaint charges the defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers.
The CFTC complaint alleges that from 16 July 2011, and continuing through at least February 2013, the defendants solicited retail customers to buy physical precious metals in off-exchange leveraged transactions. Specifically, the CFTC alleges that customers paid Vertical a portion of the purchase price for the metals, and Vertical financed the remainder of the purchase price, while charging the customers interest on the amount purportedly loaned to customers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, a financed transaction such as those conducted by Vertical is an illegal off-exchange transaction unless it results in actual delivery of metal within 28 days. The CFTC complaint alleges that with regard to the financed transactions, Vertical’s customers never took delivery of the precious metals they purportedly purchased.
The CFTC further alleges that when Vertical engaged in these illegal transactions they were acting as a dealer for metals merchant Hunter Wise Commodities, whom the CFTC charged with fraud and other violations in federal court in Florida on 5 December 2012. As alleged in the CFTC complaint against Hunter Wise and in the complaint in this case, neither Vertical, nor Hunter Wise actually purchased or held metal on the customers’ behalf.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged.