CFTC files complaint against US Coin Bullion over misappropriation of $7.9m in customer funds
Customers received purchase orders and account statements from US Coin, but the firm never purchased nor stored precious metals for these customers.
The United States Commodity Futures Trading Commission (CFTC) has taken action against US Coin Bullion LLC and individuals behind the firm’s operations. On January 8, 2020, the US regulator filed a complaint with the Florida Middle District Court.
The document, seen by FinanceFeeds, alleges that, from at least 2012 through July 2019 (the “Relevant Period”), US Coin Bullion LLC was a retail precious metals dealer which claimed to sell physical precious metals to retail customers on a fully-paid basis. Through its employees, and under the control of Salvatore Esposito, with the assistance of Joseph Esposito, US Coin solicited retail customers, offering to purchase and store precious metals for these customers.
At least 120 customers contracted with US Coin to purchase and store precious metals. These customers received purchase orders and account statements from US Coin, which stated that: (1) US Coin had purchased precious metals; and (2) that US Coin had arranged for the purchased metals to be stored at a depository.
In reality, US Coin never purchased nor stored precious metals for these customers. Instead, the defendants misappropriated more than $7.9 million in customer funds to pay for personal and business expenses. They diverted funds invested by new customers to make Ponzi scheme-like payments to earlier customers who requested account withdrawals, and invested misappropriated customer funds in leveraged precious metals in separate accounts at a third-party precious metals dealer.
Furthermore, the defendants fabricated the purchase orders and account statements in an effort to prevent US Coin customers from learning that the defendants had misappropriated customer funds.
The CFTC alleges that the defendants engage in conduct in violation of Section 6(c)(1) of the Commodity Exchange Act, 7 U.S.C. § 9(1) (2012), and Commission Regulation 180.1(a), 17 C.F.R. § 180.1(a) (2019).
At all relevant times, the acts and omissions of Salvatore and Joseph Esposito were committed within the scope of their employment, agency, or office with US Coin. Therefore, according to the CFTC, US Coin is liable as a principal for the actions and omissions of Salvatore and Joseph Esposito in violation of the Act and Regulations.
At all times during the Relevant Period, Salvatore and Joseph Esposito were controlling persons of US Coin. Therefore, Salvatore and Joseph Esposito are seen as liable as a controlling person for the actions and omissions of US Coin in violation of the Act and Regulations.
In this action, the CFTC seeks civil monetary penalties, restitution, and remedial ancillary relief, including but not limited to, trading and registration bans, disgorgement, rescission, pre-judgment and post-judgment interest.