Friday, October 2, 2020

No. 392: The Commodity Futures Trading Commission and Thirty State Securities Regulators File a Lawsuit Against Eight Defendants

On September 22, 2020, the Commodity Futures Trading Commission (CFTC) and the securities regulators of thirty states filed, temporarily under seal, a complaint in federal court against TMTE Inc. (also known as and seven other defendants. The regulators are those in Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Mexico, New York, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Washington, West Virginia, and Wisconsin. 

On the same day, the plaintiffs filed an emergency motion for a statutory restraining order, a memorandum in support of the motion, an appendix in support of the motion, a bench memorandum, and a recommendation for appointment of a temporary receiver. Two days later, CFTC lifted the seal on the complaint. (See CFTC v. TMTE, U.S. District Court, Northern District of Texas, Case No. 3:20-cv-2910.)

The Complaint
The plaintiffs allege that, from at least September 1, 2017 through the present, the defendants "have engaged and continue to engage in a fraudulent scheme to defraud at least 1,600 persons throughout the United States into purchasing gold and silver bullion." Here are four items from the "Summary" section of the complaint:
4. Defendants' scam is particularly egregious because they preyed on persons between 60 and 90 years of age and swindled them out of their retirement funds by charging them fraudulent prices to purchase Precious Metals Bullion.
6. Defendants directed SDIRA [self-directed individual retirement accounts] and Cash Account investors to purchase specific Precious Metals Bullion at grossly inflated prices that bore no relationship to the Prevailing Market Price. Defendants did not disclose the actual value of the Precious Metals Bullion and instead provided investors with invoices showing exorbitant and unreasonable prices.
9. Contrary to Defendants' material misrepresentations and omissions, Defendants knew or had a reckless disregard for the truth that virtually every one of their SDIRA and Cash Account investors during the Relevant Period lost the majority of the funds invested in fraudulently overpriced Precious Metals Bullion.
15. Unless restrained and enjoined by the Court, Defendants are likely to continue engaging in the acts and practices alleged in this complaint or in similar acts and practices, and funds they have obtained fraudulently may be misappropriated or otherwise dissipated.
The complaint includes thirty counts of alleged wrongdoing, one count for each of the thirty states. The complaint is in the complimentary package offered at the end of this post.

The Order
The case has been assigned to U.S. District Judge Sam A Lindsay. On September 22, U.S. District Judge David C. Godbey issued an order granting the plaintiffs' emergency motion for a statutory restraining order. He also approved the plaintiffs' recommendation for the appointment of a temporary receiver, and appointed Kelly Crawford to that position. The order is in the complimentary package offered at the end of this post.

General Observations
I learned of this case through a press release issued by the Texas State Securities Board, which is headed by Texas Securities Commissioner Travis J. Iles. The fact that the CFTC and the securities regulators of thirty states are the plaintiffs prompt me to believe that this is an important case.

Available Material
I am offering a complimentary 129-page package consisting of the complaint (106 pages) and the order (23 pages). Email and ask for the October 2020 package about CFTC v. TMTE.