The Commodity Futures Trading Commission (CFTC) has initiated a legal request seeking a substantial penalty against an individual connected to two financial firms, Crown Bullion, Inc. and Bright Future Financial LLC. This request was filed in the Texas Northern District Court on March 19, 2025. The proposed civil monetary penalty is set at $18.9 million, reflecting concerns over serious misconduct that violated key anti-fraud measures established under the law.
The legal basis for the penalty stems from the CFTC’s authority to pursue civil penalties that can amount to three times the financial gain realized by the defendants. In this case, the defendants benefitted from $6,316,891.83, calculated by taking the total net deposits from customers, subtracting the funds returned to them, and deducting associated business expenses totaling $926,027. Consequently, the CFTC argues that a corresponding penalty of $18,950,675.49 is warranted due to the gravity of the offenses that transpired.
Back in September 2023, the CFTC took legal action against the defendants for their deceptive practices involving the solicitation of precious metals sales to customers within self-directed individual retirement accounts (IRAs). The allegations specify that the defendants wrongfully solicited more than $7 million from over 100 individuals, primarily targeting older adults and retirees, from March 2018 onward. These activities contravened the Commodity Exchange Act and corresponding CFTC regulations.
The complaint details how the defendants specifically targeted elderly individuals for their fraudulent scheme, which involved promoting the purchase of precious metals through self-directed IRAs. Victims were misled by false advertisements that promised security and safety in precious metals investments, while also highlighting the defendants’ supposed expertise in guiding customers through these investments.
Once potential customers expressed interest and deposited their funds with IRA custodians of the defendants’ choosing, the defendants would issue falsified invoices to these custodians. This led to the misallocation of funds or assets being transferred from the custodians to the defendants. Allegations indicate that the defendants persistently misappropriated the majority of the funds they received, purchasing metals for only a small fraction of the transactions, often at artificially inflated prices.
The concern is significant given that over 100 victims have collectively transferred more than $7 million in funds or assets to the defendants, primarily from their self-directed IRAs. The level of misappropriation has raised severe alarms about the trust and safety of financial transactions involving precious metals, especially for vulnerable demographics such as the elderly.
Overall, this case highlights ongoing issues within the realm of financial regulation and the necessity for rigorous enforcement actions to protect consumers from fraudulent schemes that exploit trust and financial vulnerability. The CFTC’s request underscores a commitment to holding accountable those who engage in such deceptive practices, aiming to deter similar conduct in the financial markets.