DFPI sues to stop $68 million precious metals and coin fraud targeting seniors

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SACRAMENTO — As part of a national effort, the California Department of Financial Protection and Innovation (DFPI), in partnership with the Commodity Futures Trading Commission (CFTC) and 26 other state regulators, filed a federal trial in Los Angeles against a precious metals dealer and its owner for carrying out a $68 million fraudulent scheme targeting the elderly.

Safeguard Metals LLC and its director and owner, Jeffrey Santulan, also known as Jeffrey Hill, are accused of committing an ongoing fraud to solicit approximately $68 million in funds from more than 450 people nationwide. nationwide to purchase fraudulently overpriced metals and coins from its Southern California office. The lawsuit alleges that Safeguard Metals used false claims on its website, inflating its assets by billions and using scare tactics to motivate seniors to buy the precious metals.

“Brazen attempts to target the elderly or other vulnerable populations will not be tolerated in California,” said DFPI Commissioner Clothilde V. Hewlett. “We hope the message gets across loud and clear in the precious metals industry: we will not tolerate deception and fraud in the commodities industry and are committed to holding bad actors accountable for their actions.”

The complaint seeks a permanent injunction to end the deceptive and fraudulent practices, restitution, full restitution, rescission and civil monetary penalties. The Securities and Exchange Commission (SEC) has filed a civil suit against the same defendants alleging violations of federal securities laws.

The complaint alleges that Safeguard Metals violated federal commodity exchange law by targeting seniors and advising them to dissolve their traditional savings and retirement accounts in order to purchase highly inflated and out-of-date metals and coins. prices, sold by the company. The lawsuit alleges that the company and its owner misrepresented their credentials and told customers that precious metals were a safe and prudent investment, compared to the traditional retirement accounts that sellers acting under the direction of the company have asserted that individuals could be excluded if the stock market were to crash.

Safeguard Metals and its business associates allegedly defrauded clients into transferring proceeds from retirement accounts, often consisting of funds from liquidated securities, to self-directed individual retirement accounts called “SDIRAs” for the purchase of precious metals. Safeguard Metals also fraudulently enticed some customers to make cash and credit purchases. The alleged $68 million scheme, which includes $26 million in markups alone, took place between October 2017 and at least July 2021.

Since Safeguard Metals charged exorbitant markups and greatly inflated the price of parts sold, customers would have suffered an immediate loss to their investments. According to the complaint, Safeguard Metals charged an average markup of 71% and more recently 51% on precious metals. The company disclosed markups to consumers, which the company referred to as “operating margins,” of 23% and later up to 42%. Safeguard Metals directed over 97% of its sales from mostly inexperienced investors to overpriced silver coins that had significantly higher margins than gold coins.

This joint civil action against the precious metals trader is believed to be the second of its kind, after the CFTC and state regulators filed a lawsuit in 2020 against Metals.com and its executives, Lucas Asher and Simon Batashvili.

The DFPI encourages consumers who have been the victim of unfair, illegal, deceptive and abusive practices by a financial services provider to file a complaint with the Department online: https://dfpi.ca.gov/file-a-complaint/.

In addition to regulating commodities, the DFPI licenses and regulates state-chartered banks and credit unions, money issuers, the offering and sale of securities and franchises, broker-dealers and investment advisers. , non-bank installment lenders, payday lenders, mortgage lenders and managers, escrow companies, Property Assess Clean Energy (PACE) program administrators, debt collectors, credit repair companies and consumer credit reporting companies, debt relief companies, etc.

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