We have previously written about the effect of Dodd-Frank Section 742 on the leveraged OTC metal market and the dealers who ignore the new regulations. Lest you think that dealer fraud has been wiped out by the new law, a suit brought last month by the Federal Trade Commission will disavow you of any such notion. The FTC is seeking an injunction in US District Court, calling for the freezing of assets, contract rescissions, refunds, disgorgement and the appointment of a receiver against a metals dealer who runs three allegedly fraudulent metal dealerships – Ppm Credit, Rushmore Consulting Group and Premier Precious Metals. The dealer is charged with running the three Deerfield Beach, Florida companies as a way to sucker elderly investors out of their retirement funds using high-pressure telephone tactics and bogus descriptions of sales offerings to defraud consumers of $9 million over a two-year time period.
The suit points out that the majority of OTC precious metal buyers lose money due to the constant drain caused by transaction fees, commissions, service fees and interest charges on the leveraged portion of their accounts. Consumers have little chance of breaking even or profiting when the dealer relentlessly skims fees. Specifically, the suit charges that the dealer would telemarket to senior citizens and retirees, promising quick, sizeable profits and safety via OTC precious metal trading. The dealer made outbound phone calls to targets and responded to incoming phone calls generated by his websites. The phone conversations featured high-pressure sales tactics using incomplete and inaccurate information about metal investments – pitches such as the inevitable and continued rise in metal prices resulting in substantial short-term profits. Of course, in reality, metal markets are unpredictable and volatile.
The sales pitch went on to tout the long history of “safe haven” precious metal trading, and to advise investors to avoid “risky” futures and options contracts. What the pitch failed to disclose was the total cost of the investment or the fact that 75 percent leverage was used for purchases – a form of financing that created significant loan interest charges and heightened risk due to margin calls. Elderly consumers were mostly unaware that the money they “invested” only paid for a small portion of their holdings. Even when the dealer disclosed the use of leverage, he misstated the terms, conditions and costs of such transactions, including the monthly interest charges on the leveraged portion of each transaction.
Because of cases like this, rest assured that SalesLeads.TV will never sell lead lists to OTC leveraged metals dealers!