Off-Exchange Precious Metals
The Dodd–Frank Wall Street Reform and Consumer Protection Act effectively banned most over the counter retail contracts involving gold, silver and other metals. Under section 742(a) of Dodd-Frank, all commodities transactions entered into with a retail customer on a leveraged or margin basis must be conducted on a regulated futures exchange. An exception to the law allows for metals transactions that result in actual, physical delivery within 28 days of the transaction.
The Commodity Futures Trading Commission (CFTC) has brought enforcement actions against a number of individuals and companies for violations of the law since it went into effect in 2010. If you have evidence of illegal, off exchange transactions in gold, silver, platinum, or palladium, McEldrew Young Purtell Merritt attorneys can assist you in reporting to the CFTC whistleblower office. The CFTC’s whistleblower program pays a reward of 10 to 30 percent to eligible individuals when $1 million or more in monetary sanctions is recovered.
Fraud in the Precious Metals Market
The CFTC issued a fraud advisory that warns of scams involving the sales of precious metals and related commodities. The advisory cautioned about fraudulent techniques used by unscrupulous salespeople that promise large returns with low risks. Otherwise legitimate companies sometimes impose various fees, which may not be disclosed up front, including commissions on purchase transactions, loan origination fees, interest charges, and storage/delivery fees.
The CFTC also warned that it often cannot protect against the illegal conduct of certain foreign firms that operate in the United States. It emphasized the difficulties in trying to recover funds transferred overseas as wells the impediments to verifying the storage of metals located in foreign countries with financial privacy laws.
The Special Committee on Aging for the United States Senate published a report titled, Exploring the Perils of the Precious Metals Market, which found that seniors were overwhelmingly targeted by firms selling precious metals. The report also warned about telemarketing firms that use corrupt suppliers to defraud consumers, questionable financial arrangements involving high interest charges, and high-pressure sales tactics. It is estimated that 10,000 Americans have suffered losses of $300 million from fraud in the precious metals market.