CFTC Imposes $145.7M Penalty on Fraudulent Silver Scheme

The U.S. District Court for the District of Delaware imposed a default judgement of $145.7 million on an investment company and depository for selling silver coins fraudulently, the Commodity Futures Trading Commission announced on Monday.

Argent Asset Group LLC, First State Depository Co. LLC and Robert Leroy Higgins, the owner of both, sold American Silver Eagle coins to investors, according to the CFTC. Higgins and the companies then leased those same coins from the investors and paid investors monthly payments. They told the investors the coins were fully insured and under the custody of First State Depository.

However, the coins were not custodied or insured. Additionally, Higgins misappropriated “tens of millions of dollars” worth of coins from more than 200 customers, according to the CFTC’s release.

The scheme began in January 2014 and was known as the “Maximus Program.” Investors had the option of transferring their own coins to the defendants in exchange for monthly payments or buying them from Higgins.

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The CFTC complaint from September 2022 explained that, “To the extent that defendants even obtained ASEs for customers in the first place, defendant’s typical practice was for FSD to systematically transfer all of the customer’s ASEs to Argent and Higgins, and for Higgins to sell those ASEs to third parties. This was typically done by moving metal from FSD’s vault to Argent’s offices at FSD, but on occasion it was simply accomplished by having metal delivered directly to Argent without ever being physically placed in FSD’s vault.”

The complaint says that no assets of equal value were used to replace customers’ ASEs, and “very little, if any, of the leased silver was actually stored in customer accounts at FSD.” It goes on to say that the “Defendants misappropriated the Leased Silver, simply taking it and diverting it for their own use.”

The CFTC brought charges in October 2022. The CFTC claimed it served the defendants and that they never responded. The judge therefore issued a default judgement of $112.7 million in restitution to their victims, as well as $33 million in civil penalties.

The District Court established a receivership for First State Depository. A website made by the court-appointed receiver states that $78 million in precious metals is unaccounted for in FSD’s vaults and that Higgins was arrested on June 10.

No information on how to contact the defendants was readily available.

Tags: CFTC, commodities fraud, silver, silver coins

Initial public offerings were doing well until 2022, when Russia’s invasion of Ukraine, recession fears, spiking inflation and Federal Reserve rate boosts squelched the animal spirits. After an anemic first quarter this year for new offerings, the second quarter’s dollar value saw a small jump that nonetheless was very encouraging for IPO investors.

With the four factors that spooked last year’s IPO market now appearing less threatening, there is more optimism about companies going public. One big positive is that, unlike in bear-market 2022, this year is blessed with a vibrant stock scene: The S&P 500 is up 15.8% year-to-date.

“As we edge closer to the second half of this year, green shoots are beginning to emerge, with the macro picture turning incrementally more constructive” for IPOs, according to a research note from iCapital, a consulting and fintech firm.

“We do see a light at the end of the tunnel,” Matt Kennedy, senior IPO market strategist for Renaissance Capital, told CNBC. “All the pieces are finally in place for pickup in the second half.” Renaissance, an IPO-centric research firm, has an IPO stock index, which is up almost 38% this year, more than twice the S&P 500’s rise.

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A lot of the current cheer stems from the success of Mediterranean restaurant chain Cava Group, which went public last month. The company’s stock doubled upon its debut. Cava went to market after twice repricing the shares above the market’s expected range. Some analysts see Cava’s success as promising for other restaurant chains, like Brazilian steakhouse Fogo De Chão, which has filed regulatory paperwork for a stock offering, while both Panera Bread and Fat Brands’ Twin Peaks have each stated their intent to issue an initial public offering in the near future, CNBC reported.

While the Q2 deal count of 23 was at the same low level as the previous five periods’ tallies, Renaissance Capital was impressed that nine of the second quarter IPOs raised more than $100 million, a category that has been underpopulated since 2021.

Also heartening for IPOs: Major companies are lining up to launch their new offerings in coming months. Among them are SoftBank Group-owned chipmaker Arm Holdings and data and marketing automation firm Klaviyo, which serves such prominent e-commerce platforms as Shopify and Stripe.

In light of the IPO market’s dizzying descent, a comeback would be most welcome. In 2021, U.S. IPOs raised $142 billion for 397 offerings, according to Renaissance. That plummeted to $7.8 billion for 71 deals last year. This year’s first quarter was also dispiriting, with just $2.3 billion for 29 IPOs, and the second quarter had $6.7 billion on 23 debuts. Cava Group’s success, however, may augur a different story for the rest of the year.