Robert Higgins’ Argent and FSD ordered to pay $145.7 million for “deeply troubling” scam

The U.S. District Court for the District of Delaware entered a consent order against Robert Leroy Higgins and his companies Argent Asset Group LLC (Argent) and First State Depository Company, LLC (FSD) after finding the defendants liable for misappropriating tens of millions of dollars and making fraudulent misrepresentations to customers in connection with the purchase and sale of precious metals.

The order by Judge Richard G. Andrews requires the defendants to pay $112,700,000 in restitution to those defrauded and pay a $33 million civil monetary penalty.

The case, brought forth by the CFTC, focuses on a fraudulent and deceptive scheme that took place between 2014 and 2022, where the defendants solicited and misappropriate tens of millions of dollars in funds and silver from approximately 200 customers in connection with a fraudulent silver leasing program known as the “Maximus Program.”

Monthly “lease” payment for gold and silver coins

The Maximus Program purported to offer customers guaranteed monthly lease payments in exchange for the use of silver purportedly purchased from Argent or silver owned by customers.

Customers were told they would earn a monthly “lease” payment based on a sliding scale that, in part, depended on the amount of silver the Maximus customers leased to Argent. Customers were falsely told, among other things, that Argent would acquire silver on their behalf, their silver was securely stored by FSD in a storage facility, and their investments were guaranteed and fully insured.

In reality, customers’ precious metals were not securely stored at FSD but instead were misappropriated by the defendants. Moreover, on several occasions, the defendants also misappropriated funds intended to be used to purchase metals.

As the orders state, the defendants’ fraudulent scheme was not limited to the Maximus Program. The defendants misappropriated other client assets and misled and deceived those clients when they attempted to withdraw their assets or transfer them to another depository. In addition, the defendants lied about the insurance coverage FSD maintained and failed to adequately insure its clients’ assets despite representations and guarantees it made to the contrary.

Following the filing of the CFTC complaint, the investigation of the Court-appointed receiver revealed the full scope of the Defendants’ fraud—as much as $112.7 million in assets were missing from FSD, including over 500,000 American Silver Eagle Coins. Defendants deceived customers by suggesting that they were holding the coins on behalf of customers.

Over 9,000 gold coins were also missing from customer accounts. According to the receiver, a majority of the assets that were supposed to be held at FSD were missing. The receiver found that Defendants brazenly left “IOU” slips in empty boxes marked to indicate a customer’s account, yet containing no assets. This kind of egregious behavior merits the full weight of the Commission’s enforcement authority.

CFTC Director of Enforcement Ian McGinley said: “The Commission is resolute in rooting out fraud in the precious metals markets. As today’s restitution amount demonstrates, the CFTC is committed to vindicating victims’ interests.”

“Defendants simply stole customer money or metals, without even a veneer of legality”

CFTC Commissioner Kristin Johnson commented: “The active efforts to conceal misappropriation by sending fake account statements indicating that Defendants had carefully stored and accounted for customer assets, and offering false and misleading excuses for why assets could not be withdrawn represents the very type of fraud Congress expressly intended to prevent when it enacted the Commodity Exchange Act.

“The CFTC has initiated many actions against fraudsters seeking to bilk hard-working Americans out of their hard-earned dollars by aggressively marketing precious metals, often at an excessive mark-up, while charging exorbitant storage and other fees. This case is deeply troubling; Settling Defendants simply stole customer money or metals, without even a veneer of legality. Accordingly, the Consent Order requires the Settling Defendants to pay restitution of $112.7 million, as well as a civil monetary penalty of $33 million and permanent trading and registration bans”, she continued.

“While these sums are large, they are justified. Our enforcement efforts must be sufficiently calibrated to deter fraudsters from targeting vulnerable investors. There can be no mistake; we are committed to policing markets, identifying and investigating fraud, and protecting vulnerable customers from such conduct.”