The Commodity Futures Trading Commission today announced that the U.S. District Court for the Western District of Washington entered a consent order against Aaron Michael Scott of Portland, Oregon for fraud and misappropriation in connection with a precious metals scheme run by Scott and his now defunct company, BMC Worldwide, Inc. (d/b/a Blue Moon Coins). The order requires Scott to pay $1,381,461.86 in restitution to defrauded customers. Additionally, the order prohibits Scott from further violations of the Commodity Exchange Act and CFTC Regulations and permanently bans him from registering with the CFTC and trading in any commodity interests.
The order resolves a CFTC action against Scott for engaging in fraud and misappropriation in connection with a gold-and-silver scheme from at least October 2013 through April 2014. The case was filed on October 3, 2018. [See CFTC Press Release No. 7822-18]
The order finds that Scott and BMC fraudulently represented that BMC was a highly successful precious metals firm. As detailed in the order, Scott and BMC persuaded customers to purchase gold and silver from BMC by claiming that, among other things, they maintained an inventory of precious metals in stock and would fulfill a customer’s order from that inventory or would purchase precious metals from a supplier upon receipt of payment.
The order also states that Scott and BMC did not maintain an inventory of precious metals sufficient to fulfill customer orders and, in many cases, made no effort to secure the precious metals needed to fulfill customer orders. Instead, they misappropriated the vast majority of customer funds and used them to pay BMC’s operating expenses, invest in other businesses, pay unrelated debts, and refund disgruntled customers or fulfill other customer orders in the nature of a Ponzi scheme.
Parallel Criminal Action
In a separate, parallel criminal action, Scott pleaded guilty to wire fraud on November 1, 2018. [United States v. Scott, No. CR18-5500-RBL (W.D. WA.)] The court sentenced Scott to four years in prison and three years of supervised release on April 5, 2019. The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Washington.
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure wrongdoers are held accountable.
The Division of Enforcement staff members responsible for this case are Stephen Turley, Jenny Chapin, Brett Shanks, Jeff Le Riche, Christopher Reed, and Charles Marvine, as well as former staff members James Humphrey, Peter Riggs, and Jo Mettenburg.
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CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.
Also, before investing or trading with a firm, check the firm’s registration status and disciplinary history, if registered, with the National Futures Association. A company’s registration status can be found at: www.nfa.futures.org/basicnet.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office at whistleblower.gov. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the Act.