INCREDIBLE: Florida — AGAIN: CFTC Charges Ft. Lauderdale Firm, Principals In Alleged Precious-Metals Scam; ‘Defendants Never Held Or Acquired Any Metals,’ Agency Says

On the same day the SEC announced charges against two residents of South Florida in an alleged $30 million Ponzi scheme, the CFTC went to federal court and accused two other residents of the region of conducting a precious-metals scheme.

Charged by the CFTC were James A. Ward of Ft. Lauderdale, and Nathaniel R. Walker of Lauderhill. Also charged was their firm, Kastle & Hawke Inc. of Fort Lauderdale.

Florida has been plagued by spectacular fraud schemes. Just two days ago, David A. Smith, a citizen of Jamaica, pleaded guilty to charges in a $220 million Ponzi scheme. Last week, the U.S. Court of Appeals for the District of Columbia Circuit ruled that Ponzi-related orders of forfeiture totaling more than $65.8 million in a 2008 civil case would stand against Florida resident Andy Bowdoin, who now is charged criminally in the alleged AdSurfDaily Ponzi scheme. Prosecutors said Bowdoin’s ASD had gathered at least $110 million.

In the case against Ward and Walker, the CFTC said “the defendants never held or acquired any metals for customers and charged customers interest on non-existent loans.”

U.S. District Judge James I. Cohn has frozen their assets, amid allegations the company misappropriated at least $319,000 from customers hoodwinked in the scheme. Cohn also ordered books and records to be preserved.

“To conceal their fraud, the defendants allegedly manufactured and sent false account statements and transaction confirmations to customers,” the CFTC charged.

“K&H does not hold, nor has it ever acquired, any physical precious metals on behalf of customers,” the CFTC charged.

When customers wanted to sell the metals they believed they had acquired, Ward manufactured one excuse after another, the CFTC alleged. Customers were told that “rogue” traders were responsible for his inability to sell the metals, according to the complaint.

And they also were told that the metals could not be sold because of “problems in London,” because markets were closed for the holidays and because “force majeure” — things beyond the company’s control — had occurred, the CFTC charged.

One of the things that occurred was that the unregistered company had advertised it was selling palladium on a leveraged basis to customers, an unlawful act in itself, the CFTC said.

On the K&H website, the company told prospects they could take advantage of a “Leveraged Purchase Program” that allowed them to finance up to 77 percent of the costs of the precious metals over five years — “without having to make monthly payments or undergo credit checks,” the CFTC charged.

Customers were told the company’s approach would lead to hefty profits, but it was all a scam, the CFTC charged.

In April and May of 2010 — as the firm was explaining to customers why they could not claim their profits even as it was charging them interest on nonexistent loans — Ward withdrew $21,350 in cash from the company’s bank account “and spent nearly $9,000 at a grocery store chain, draining the bank account to a balance of less than $500,” the CFTC charged.

Read the stunning CFTC complaint.