Florida Brothers Plead Guilty To $7 Million Silver Ponzi Scheme
Two Florida brothers have pleaded guilty to federal fraud charges for operating a Ponzi scheme that raised at least $7.9 from over 100 investors who thought their precious metal purchases were being held at a secure depository. Salvatore Esposito, 47, and Joseph Esposito, 43, each agreed to plead guilty to a single count of conspiracy to commit mail and wire fraud according to a filing in the Orlando Division of the U.S. District Court for the Middle District of Florida. The fraud charge carries a maximum twenty-year prison sentence and a $250,000 fine, although any sentence handed down by the presiding judge will likely be lower due to federal sentencing guidelines. A hearing is scheduled later this week on the change of plea.
According to authorities, the Esposito brothers operated U.S. Coin Bullion LLC (“US Coin”) out of Orlando, Florida. Formed in 2012, the company primarily offered two investment opportunities that depended on whether or not the customer actually took physical delivery of the precious metals. If a customer elected to take physical delivery of the metal, it was delivered to them via a shipping company. But if physical delivery was not preferable, U.S. Coin told investors that their investment would be held in a safe and secure depository until further instructions were received regarding sale or delivery. In the event that the customer no longer wished to hold the investment, U.S. Coin also promised that it would buy back the precious metal at the current market price. From 2014 to July 2019, U.S. Coin took in nearly $8 million from over 100 customers who believed that their purchased precious metals would be held in a secure U.S. Coin depository. Those customers also received account statements showing the purported value of their accounts.
However, the brothers’ plea agreements indicate that these claims were false. The depository holding company identified in customer agreements that would purportedly hold customers’ precious metals was actually a company owned by an acquaintance of the Esposito’s with a name designed to sound similar to an existing well-known depository. U.S. Coin never purchased any physical quantities of precious metals, nor did the depository store those holdings, because the depository did not have anywhere to actually store the metals.
Instead, U.S. Coin used some customer funds to purchase “open positions” of various precious metals, usually silver, with a well-known commodities and metals trader. In some situations, U.S. Coin also used customer funds to purchase silver on margin which required payment of interest and storage costs on the required margin loan as well as susceptibility to margin calls in the event of declining silver prices. Unfortunately, the price of silver continually dropped during the period of the alleged fraud, dropping from $35 an ounce in 2012 to under $15 an ounce. As a result of the declining price and the leveraged margin purchases, as well as the diversion of customer funds to buy back other customers’ investments, U.S. Coin “lost all of the money that its customers had invested in precious metals that did not involve physical delivery to the customer.”
The arrests come more than 10 years after the Esposito’s were sued in 2008 by the Florida Attorney General’s Office for their operation of an illegal foreclosure-assistance company named Financial Management Advisors. The Florida AG alleged that the company illegally unlawful charged homeowners a fee to assist with a loan modification, and a Florida judge later ordered that the Esposito’s and their business partner pay nearly $400,000 in restitution.
The criminal Information is below: