About three months after the United States Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Robert Jeffrey Johnson, Kathleen Hook, Ross Baldwin, Precious Commodities, Inc, National Coin Broker, Inc, and NCB Wholesale Co, the Court has stayed the action.

Today, Judge Lewis J. Liman of the New York Southern District Court signed an order granting the motion by attorney Damian Williams, United States Attorney for the Southern District of New York, and Noah Solowiejczyk, Assistant United States Attorney, to intervene and stay the matter pending the conclusion of a related criminal case.

The CFTC, however, may move for entry of default and for default judgment against the non-appearing defendants and without prejudice to a motion by the non-appearing defendants to lift the stay.

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.