FRAUD

Miami Beach gold scheme ends in $5 million settlement

 

The firm selling gold out of its Miami Beach offices noted in its disclosure forms that “precious metal trading is not an appropriate investment for retirement fund.” But federal regulators say the company ignored its own warning, selling risky gold investments to about 50 people over the age of 65, including one person in hospice care.

Pan American Metals of Miami and its sister company, Pan American Metals of Miami Beach, agreed to pay almost $5 million in fines and restitution over fraudulent precious-metal sales that ended up losing money for almost all of their investors, the U.S. Commodity Futures Trading Commission announced Monday. The agency said Pan American misled investors into thinking they were buying gold at a fraction of market price, and then would store the bullion at the company’s vaults until it was time to resell for a profit. Pan American didn’t buy any gold, but essentially made book entries on the purchases and only paid out if the price of gold rose enough to cover hefty fees charged investors. Those fees — including commissions and interest when customers chose to finance their investments — hit about 35 percent of the purchase prices.

In all, Pan American took in about $4.7 million from customers. Of that, investors lost about $3.1 million, the CFTC claimed in its civil complaint against Pan American and its owner, William Hionas, of Sunny Isles Beach. Of the 46 investors over the age of 65 — including four in their 90s — only one made money in a Pan American deal, the CFTC said.

The transactions were not part of an official exchange regulated by the CFTC, making the investments illegal under the 2010 Dodd-Frank securities and banking law, the CFTC said. Allan Lerner, an attorney for Hionas, could not be reached Monday afternoon.

For a CFTC alert on precious-metal scams, click here.

DOUGLAS HANKS

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