A Newport Beach precious metals firm was raided Friday by FBI agents who seized corporate and customer account records as part of a criminal investigation of the unlicensed sale of gold and silver futures, The Times has learned.
A spokesman for the Los Angeles regional office of the Federal Bureau of Investigation confirmed Monday that FBI agents served a search warrant Friday at Investment Metals International Inc., which operates from an office suite in posh Newport Center.
The warrant and all other materials pertaining to the case have been placed under a judge's seal in U.S. District Court in Los Angeles, but the FBI spokesman said Monday that the warrant was based on an FBI affidavit alleging mail fraud and wire fraud at Investment Metals.
Officials at Investment Metals could not be reached for comment Monday.
Law enforcement sources said the raid on Investment Metals International is part of an ongoing state and federal crackdown on unlicensed dealers of precious metals futures in Southern California. It also represents a significant change in federal policy regarding unlicensed dealers who sell precious metal futures contracts.
In the past, most investigations have been handled by the Federal Commodity Futures Trading Commission as civil violations of the Commodity Exchange Act of 1974. The new policy, the sources said, is to pursue unlicensed dealers under criminal statutes.
In the past year, the California Department of Corporations has subpoenaed the records of 25 Southern California precious metals dealers, most of them in Orange County, and the Commodities Futures Trading Commission, the state Justice Department and the FBI have initiated civil or criminal actions against five Southland dealers, four of them in Orange County.
The law enforcement sources and others close to the case said Investment Metals is suspected of the unlicensed, unregistered sale of contracts for future delivery of gold and silver--a felony violation of the federal Commodity Exchange Act of 1974. A future purchase contract obligates the buyer to pay a set price for a commodity that is to be delivered at a date in the future, regardless of the market value of the commodity at the time of delivery.
Arthur Salzberg, Los Angeles regional counsel for the enforcement division of CFTC, said Monday that he could neither affirm or deny the existence of an investigation of Investment Metals. But he said the company "is not a member of any regulated exchange, not licensed by or registered with the Commodity Futures Trading Commission and is not a member of the National Futures Assn."
And any company trading precious metals or other commodities for future delivery, said Salzberg, "must be licensed by the CFTC" and must be a member of the National Futures Assn.
"There appear to be a number of firms in Southern California that continue to illegally offer commodities for future delivery without being licensed," he said.
The company has been advertising heavily in several major newspapers and, sources said, appears to have more than 1,000 customers in several states. Investment Metals last year had as much as $15 million in sales, the sources said.