The Securities and Exchange Commission (SEC) filed charges against a company and its owner for an alleged multimillion-dollar scheme to defraud investors into buying gold and silver coins.
The charges are against Safeguard Metals and its owner, Jeffrey Santulan, who, according to the SEC, acted as investment advisers and persuaded investors to sell their existing securities, transfer the proceeds into Individual Retirement Accounts, and invest the proceeds into gold and silver coins. The SEC alleges that the company made false and misleading statements about the safety and liquidity of the investors’ securities investments, Safeguard’s business, and its compensation.
This activity occurred between December 2017 through at least July 2021, SEC officials said. Most of the defrauded investors were at or near retirement age.
The charges say Safeguard fraudulently marketed itself as a full-service investment firm with $11 billion in assets under management and offices in London, New York City, and Beverly Hills. The company claimed to employ prominent individuals in the securities industry.
In reality, the SEC alleges that Santulan operated the company from a small, leased space in a Woodland Hills, Calif. office building using sales agents. The complaint alleges that Safeguard’s sales agents used prepared scripts filled with false and misleading statements about how the market would crash and their retirement accounts would be frozen under a new “unpublicized” law.
“The federal securities laws prohibit deceptive conduct and material misrepresentations in the purchase or sale of securities,” Kathryn Pyszka, an associate director in the SEC’s Chicago Regional Office, said. “We will take action when, as alleged, parties fraudulently induce investors to sell their securities through lies and deception.”
Further, Safeguard and Santulan allegedly misled investors about commissions and markups on the coins. The SEC says they charged average markups of approximately 64 percent on its sales of silver coins instead of the 4 percent to 33 percent markups that they disclosed to investors.
The SEC complaint says that Safeguard obtained approximately $67 million from selling coins to more than 450 primarily elderly retail investors — and kept roughly $25.5 million in markups.
Safeguard and Santulan were charged with violating the antifraud provisions of the federal securities laws. The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains, plus interest, and civil penalties.