FTC Awarded A Lien On The Home Of Florida Fraudster

In Federal Trade Commission v. American Precious Metals, LLC (decided on April 10, 2017 in the Southern District of Florida), the Federal Trade Commission (FTC) obtained an equitable lien on the home of defendant Sam Goldman despite the fact that Goldman’s home was located in Florida, considered a “homestead” state.

Homestead states are states with laws designed to protect homeowners by allowing them to register their property as a "homestead."  Registration has the effect of making the property off-limits to most creditors, including many who prevail in lawsuits against the homeowners. The type and amount of property that can be set aside as homestead varies from state to state, but the basic principle is constant.

State homestead exemptions generally often have four common features: they apply to the primary residence, they provide exemption (or partial exemption) from property taxes, there is a continuity of rights to a surviving spouse, and, most relevant to this article, they provide forced sale immunity. This means that homeowners are shielded from forced sales intended to satisfy creditors (however, the immunity does not normally shield a home from forced sale in mortgage foreclosures or for defaulted property taxes).

Florida is considered one of the strongest states in terms of protecting homesteaders from creditors. This reputation made the American Precious Metals ruling a surprising one.

According to the FTC, Goldman took part in a scheme to sell precious metals without effectively disclosing that the investments were highly leveraged, subject to costly margin calls, and often invested in derivatives rather than the physical precious metals themselves. The scheme—run through a company called American Precious Metals bilked consumers out of over $24 million.

The Company did not have enough assets to satisfy the judgment, so the FTC sought a lien on Goldman’s home.  The standard for obtaining an equitable lien on a Florida homestead is that the party seeking the line must establish by a preponderance of the evidence: (1) the existence of fraudulent or egregious conduct, and (2) the tracing of funds from that conduct to the purchase or improvement of the homestead.

The Court had previously determined the precious metal scheme to be fraudulent, and now found that the FTC’s forensic accountant had traced the fraudulently obtained funds to Goldman’s home using Goldman's bank records. Therefore, the Court granted the lien in favor of the FTC in the amount of $428,604.

TAKEAWAY: While many states offer homestead protection that blocks the enforcement of judgments against a person’s home, this decision shows that such protection is not absolute.  Defendants found guilty of fraud could lose their homes if the profits of the fraud were used to purchase the home.

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