Today, the Commodity Futures Trading Commission (CFTC or Commission) filed a Consent Order for Permanent Injunction, Civil Monetary Penalty, and Other Equitable Relief Against Settling Defendants in the U.S. District Court for the District of Delaware against First State Depository Company, LLC (FSD) and Argent Asset Group LLC (Argent, and together with FSD, Settling Defendants), resolving an action initially filed on September 27, 2022, charging the Settling Defendants and their owner, Robert Leroy Higgins (together with the Settling Defendants, Defendants), with engaging in a fraudulent and deceptive scheme in connection with the purchase and sale of precious metals.[1]  The CFTC’s complaint alleged that the Defendants operated fraudulent silver leasing programs referred to as the “Maximus Program” and the “Silver Lease Program,” through which they fraudulently solicited and misappropriated at least $7 million in funds and silver from at least 200 customers.  FSD purported to be a “private depository” that would store customer metals.  Argent was engaged in the business of buying, selling, and leasing precious metals.

Following the filing of the 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.

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stored and accounted for customer assets, and offering false and misleading excuses for why assets could not be withdrawn represents the very type of fraud Congress expressly intended to prevent when it enacted the Commodity Exchange Act.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.[2]  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.

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.

I thank the Division of Enforcement staff for their efforts in bringing this case, including Erica Bodin, Brian Hunt, Michael Loconte, and Rick Glaser, as well as former employee Michael Solinsky.