CFTC files civil suit against commodity trader Hunter Wise Wed Dec 5, 2012 7:06pm EST
Defendants accused of fraudulently marketing commodity contracts
* Company lawyer says asked for ruling in Illinois
* CFTC seeks monetary penalties, restitution of client money
By Douwe Miedema WASHINGTON, Dec 5 (Reuters) -
The top U.S. derivatives regulator on Wednesday filed a civil complaint against Hunter Wise Commodities and accused the company of fraudulently marketing commodity contracts.
The Commodity Futures Trading Commission (CFTC) alleges that Hunter Wise, based in Las Vegas, had improperly taken in at least $46 million in customer funds since July 2011.
The 2010 Dodd-Frank law expanded the CFTC's jurisdiction over such transactions, it said, demanding that they be executed on exchanges or other regulated markets.
A lawyer representing Hunter Wise said the company had a different view on how to interpret the law, and had asked a judge in the Northern District of Illinois to make a ruling in the matter, which was due on Dec. 11.
The CFTC's complaint showed how the defendants claimed to sell physical metals to retail customers. Customers would make a down payment, and the companies would then arrange loans for the balance of the purchase price.
But these statements were false, and the transactions were just paper deals, the CFTC alleges.
The CFTC had warned against these practices before, saying that
companies frequently do not purchase any physical metals,
instead simply keeping the customer's funds.
Leveraged commodity transactions were unlawful, the CFTC said, unless executed on a regulated exchange.
The CFTC asked the Southern District Court of Florida, where Hunter Wise did business, for civil monetary penalties, to order the defendants to stop their activities, and to make full restitution to people whose funds they had received illegally.
(Reporting by Douwe Miedema; Editing by Lisa Shumaker)
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