CFTC Wins Fraud Trial Against Hunter Wise Precious Metals, Which Must Pay $108 Mln In Penalties

The Commodity Futures Trading Commission said Thursday it won a fraud trial against a Florida-based precious metals firm and its related companies, plus the owners of the firm, with a federal court ordering the companies and owners to pay more than $108 million in restitution and penalties.

On May 16, a Florida federal court ordered Hunter Wise Commodities, LLC; Hunter Wise Services, LLC; Hunter Wise Credit, LLC; and Hunter Wise Trading, LLC and the individuals running the companies, Fred Jager and Harold Edward Martin, Jr., to pay, jointly and severally, $52.6 million in restitution to the defrauded customers, and to pay a civil monetary penalty, jointly and severally, of $55.4 million, the maximum provided by law, the CFTC said.

“This result makes clear that the CFTC will aggressively act to protect customers from fraud. Customers are entitled to know the truth of how their hard-earned money is being used. Here, customers thought defendants were purchasing precious metals on their behalf and they were not,” said Gretchen L. Lowe, acting director of the CFTC’s division of enforcement, in a press release. “This is also another excellent example of how the CFTC is using its new enforcement authority under Dodd-Frank to go after fraudsters.”

The agency originally charged Hunter Wise and its owners in December 2012, and in February 2013, the court entered a preliminary injunction against the firm and its owners. Hunter Wise, Jager and Martin appealed the ruling, saying the CFTC lacked jurisdiction, but they lost the appeal.

Judge Donald M. Middlebrooks of the U.S. District Court, Southern District of Florida, wrote in his 58-page order that Jager and Martin knowingly defrauded more than 3,200 retail customers for more than 16 months, between July 2011 and February 2013, the CFTC said. The agency said the Court found Jager and Martin’s fraudulent conduct was “repeated, callous and blatant.”

The CFTC said Middlebrooks wrote that Martin and Jager’s excuses were “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,’” the CFTC said.

When deciding upon penalties, the CFTC said the court called the scheme “egregious and recurrent” and “calculated to deceive retail customers,” and there was a “strong” likelihood they may repeat the scheme, as Jager and Martin never acknowledged any wrongdoing.

All customers who lost money between July 16, 2011 and Feb. 25, 2013 will receive full restitution, according to the CFTC.