The Commodity Futures Trading Commission (CFTC) has provided an update to the status of its lawsuit against Jeffrey Johnson, Kathleen Hook, Precious Commodities Inc., NCB Wholesale Co., Ross Baldwin and National Coin Broker, Inc.
As per documents filed with the New York Southern District Court on November 15, 2024, the CFTC seeks to extend the stay of its action against the defendants.
Let’s recall that the CFTC complaint alleges that from approximately June 2014 through at least October 2019 Precious Commodities, Inc, National Coin Broker, Inc, and NCB Wholesale Co, acting as a common enterprise controlled by Johnson and Hook, engaged in a fraudulent and deceptive scheme to solicit and misappropriate at least $8 million in funds and silver from at least 60 investors in connection with a fraudulent silver leasing program, referred to as the “Silver Lease Program.”
The complaint further alleges that Baldwin, Johnson, and Hook either directly engaged in deceptive conduct in furtherance of the scheme, or did so indirectly by virtue of their being control persons of NCB, PCI, and NCBWC, respectively.
As alleged in the complaint, the Silver Lease Program purported to offer investors guaranteed monthly lease payments in exchange for the use of silver purportedly purchased from NCB or silver already owned by investors. Investors were told that they would earn a monthly dividend between 3.9% and 5% for the use of their silver, i.e., that the silver would be used on a short-term basis to fulfill purchase orders and it would be replaced within a few days. Moreover, investors were told, falsely, among other things, that their investments were guaranteed and fully insured and their silver would be stored by PCI securely in a storage facility, often referred to as a vault.
In reality, as alleged in the complaint, the Silver Lease Program was complete fiction because PCI never operated or maintained a vault or secure storage facility capable of storing the silver purportedly held for investors. Moreover, according to the complaint, PCI and/or NCBWC misappropriated investors’ funds as well as any metals pledged to the Silver Lease Program by investors.
In addition, the defendants used investor funds to make monthly payments to investors purporting to be “dividend” payments, but which were in fact Ponzi-style payments by PCI.
As per the latest status update provided by the CFTC, the criminal action against Ross Baldwin, Jeffrey Johnson, and Kathleen Hook has now concluded.
Defendants Jeffrey Johnson, Kathleen Hook, Precious Commodities Inc., and NCB Wholesale Co. are in default in the CFTC action, and the CFTC will be filing motions for default judgment as to each of those defendants.
In addition, counsel for plaintiff CFTC and the two non-defaulting defendants, Ross Baldwin and National Coin Broker, Inc., have begun to discuss potential settlement in this matter. On November 14, 2024, the CFTC provided proposed settlement terms to Baldwin and National Coin Broker, Inc. that the CFTC’s Division of Enforcement would be willing to recommend to the Commission that—if approved by the Commission and then approved by this Court—would resolve this action against both non-defaulting defendants.
Counsel for the non-defaulting defendants has indicated that Baldwin and National Coin Broker, Inc. agree in principle to the proposed terms, subject to review of the proposed draft consent order.
Although the Commission prosecutes actions through the Division, the Division itself does not possess independent settlement authority. Rather, the Division presents executed offers of settlement to the Commissioners who comprise the Commission with its recommendation that such offer be accepted or declined.
The parties request that the stay in this action continue for an additional sixty days, until January 14, 2025, by which date the CFTC will (1) submit a default judgment motion as to the four defaulting defendants, (2) submit a proposed consent order as to non-defaulting defendants Baldwin and National Coin Broker, Inc., or report back to the Court regarding the status of the case, and/or (3) make any further requests to the Court as may be appropriate.
