FTC Shuts Down American Precious Metals, LLC, a Precious Metals Boiler Room Based out of Deerfield Beach, Florida that Preyed on Seniors
At the Federal Trade Commission’s (FTC) request, a federal judge this week has halted a telemarketing operation that allegedly conned senior citizens into buying precious metals on credit without clearly disclosing significant costs and risks, including the likelihood that consumers would have to pay more money or lose their investment. According to papers filed with the court, the scheme has taken in more than $37 million from consumers. The court has ordered a stop to the defendants’ allegedly deceptive practices pending a trial, and has frozen their assets and appointed a receiver to oversee the business.
According to the FTC’s complaint, the defendants promised consumers they could earn large profits quickly by investing in precious metals such as silver, gold, platinum, and palladium. Using high-pressure sales tactics, telemarketers led consumers to believe that they were offering low-risk investments that would double or triple in value in a short time. The company’s sales pitches and marketing materials claimed precious metals are low-risk investments because they are tangible, physical assets – bars, bullion and coins – but in fact the defendants did not use consumers’ money to buy precious metals. Instead, after taking fees and commissions that were not clearly disclosed to consumers, they deposited consumers’ money in the account of a clearinghouse that recorded the investments but did not buy or handle metals.
The FTC further alleged that consumers were often not told their investments were leveraged, that is, that they were agreeing to take out a loan and pay interest for up to 80 percent of the purchase price of the metal investment. In addition, consumers did not know that their leveraged investments were subject to equity calls that might require them to pay more money to prevent their investments from being liquidated. Because consumers’ leveraged investments were opened with low equity levels and incurred hefty interest charges, the investments were vulnerable to equity calls even if prices remained constant.