The US Commodity Futures Trading Commission (CFTC) has filed a civil enforcement complaint against Florida attorney Jay Bruce Grossman charging him with aiding and abetting multiple clients in the operation of illegal and fraudulent precious metals schemes.
According to the CFTC complaint, Grossman’s clients, such as Hunter Wise Commodities, claimed to sell physical metals, such as gold, silver, platinum, palladium, and copper, to retail customers on a financed basis.
Under the CEA, since 16 July 2011, such transactions are required to be executed on or subject to the rules of a board of trade registered with the CFTC.
Grossman’s clients did not, however, execute the transactions on a board of trade; they never actually owned, possessed, or sold any physical metals; nor did they disburse loans to customers.
The complaint further alleges that Grossman was well-versed in the inner workings of Hunter Wise’s business and has long been aware that Hunter Wise did not sell or store physical metals for or disburse loan funds to its dealers or retail customers. Nevertheless, Grossman aided his clients in crafting the illusion that their schemes were legitimate and complied with the law, and Grossman drafted fraudulent customer forms and made material misrepresentations regarding the true nature of his clients’ businesses, including to the courts and the CFTC.
As alleged, Grossman’s unlawful actions ultimately enabled his clients to defraud thousands of unsophisticated retail customers out of millions of dollars.
Aitan Goelman, director of the division of enforcement, says: “This action shows that the Commission will not hesitate to bring cases against gatekeepers, including attorneys, who are complicit in violating the CEA. Lawyers and accountants have the professional responsibility to avoid participating in unlawful conduct that is perpetrated by their clients.”
The CFTC previously obtained judgments in its civil enforcement actions against the following clients, which the CFTC complaint alleges that Grossman aided and abetted in their violations of the CEA:
· On 16 May 2014, a federal court in Florida found that Grossman client Hunter Wise and its owners committed “repeated, callous, and blatant” fraud in their operation of a precious metals scheme and ordered Hunter Wise and its owners to pay USD52.6 million in restitution to defrauded customers and a USD55.4 million civil monetary penalty.
· On 24 July 2014, a federal court in Florida ordered Grossman client AmeriFirst Management LLC and its owners to pay USD25 million in restitution and a USD10 million civil monetary penalty for their operation of a fraudulent precious metals scheme.
· In the same action, the court also ordered Grossman clients James Burbage and Frank Gaudino, and their companies Lloyds Commodities LLC, Lloyds Commodities Credit Company LLC, and Lloyds Services LLC, to pay restitution totalling over USD2 million and civil monetary penalties totalling over USD2.9 million for engaging in unlawful retail off-exchange precious metals transactions.
· Additionally, the CFTC filed and settled charges with two additional Grossman clients, Secured Precious Metals and Joseph Glenn Commodities, for engaging in unlawful retail off-exchange precious metals transactions while acting as metals dealers for Hunter Wise.
In its continuing litigation against Grossman, the CFTC seeks a permanent injunction from future violations of the CEA, as charged, permanent registration and trading bans, and a civil monetary penalty.