As we have discussed before, doesn’t sell lists to telemarketers in the leveraged OTC precious metals business because of all the fraud reported in that market. An article last year in the Sun Sentinel highlighted the problem, which plagues Broward and Palm Beach Counties with dozens of precious metal firms. Since 2007, over 45 firms have launched in these two counties – 23 were being investigated at the time the article was written.

The Scam

A telemarketer (with or without the required state license) calls you and offers to get you into gold and silver with little money down – often 20 cents on the dollar. They will warehouse your holdings for you so that they remain “safe”. You send in your money and receive reports from time to time showing you how much money you are making. At some point, you decide to withdraw your money. Suddenly, the reports stop coming, the firm’s telephone number is disconnected and your money is gone.


Even when legitimately run, a leveraged metals transaction is very risky. It’s true that you only put down 20 percent, but that means you are borrowing (and are on the hook for) the other 80 percent. You must pay interest on your borrowings, plus fees and commissions and whatever else they want to charge you. Then, if the market should temporarily move against you, you will receive a margin call – put up more collateral or lose all of your investment. High leverage ratios make it difficult or impossible to make a profit unless you actively day-trade your portfolio, and even then it’s tough. As a passive investor, you don’t stand a chance.

The Perpetrators

Over the 2010 – 2011 time period, at least seven South Florida precious metal dealers have amassed losses exceeding $54 million. Some notables include:

  • Global Bullion Exchange in Lake Worth lost $29.5 million belonging to 1,400 investors in what the owner admitted was a Ponzi scheme in which actual metals were never purchased.
  • The bank account of JDC United Metals Inc. was frozen by the Broward County court after a 70-year-old investor accused the firm of a $627,500 fraud.
  • Three related Miami companies — Certified Inc., Global Bullion Trading Group Inc. and WJS Funding – went bankrupt with $22 million in outstanding claims.

Laws were toughened up last year to mandate physical delivery of metals within 28 days or else the transaction falls under federal jurisdiction, thereby requiring a federal commodities license. We hope this is helping, but it is impossible for us to know who is legit and who is a crook in this business, so we say to all of you leveraged OTC metals dealers: “Phooey – take your business elsewhere!”

Eric Bank