The United States Commodity Futures Trading Commission (CFTC) and 27 state securities regulatory agencies that are members of the North American Securities Administrators Association (NASAA) announced the filing of a joint civil enforcement action in the U.S. District Court for the Central District of California against a precious metals dealer and its owner for orchestrating a $68 million fraudulent scheme targeting elderly persons nationwide.
The complaint charges defendants Safeguard Metals LLC and its principal, Jeffrey Santulan a/k/a Jeffrey Hill with executing an ongoing nationwide fraud that solicited and received approximately $68 million in investor funds to purchase precious metals and fraudulently overpriced silver coins. Safeguard Metals is located in Woodland Hills, California, and Jeffrey Santulan resides in Tarzana, California.
The complaint alleges that from approximately October 2017 and continuing through at least July 2021, the defendants fraudulently solicited and received approximately $68 million in customer funds—the majority of which was retirement savings—from at least 450 persons throughout the US for the purpose of purchasing precious metals, primarily consisting of gold and silver coins.
According to the complaint, the defendants deceived customers into purchasing precious metals through false and misleading statements, including about the risk and safety of their investments in traditional retirement accounts. The defendants also deceived customers into purchasing silver coins at grossly inflated prices that bore no relationship to the ranges represented to customers.
The markup that customers paid on silver coins, for example, averaged from 51 percent to over 70 percent. That was substantially more than the amounts the defendants represented in Safeguard Metals’ customer agreements. In the end, nearly every customer suffered an immediate loss of their investment on the purchase of precious metals from Safeguard Metals.
As the complaint alleges, to perpetuate their fraud, when questioned by customers about the value of the precious metals they purchased, the defendants claimed the silver coins were rare and carried a premium far above the base melt value to conceal their fraud and hide that customers significantly overpaid for their investments. In fact, the silver coins were significantly less valuable than the defendants claimed, based on the resale prices the firm marketed and promoted.
In a simultaneous filing, the SEC commenced a suit against Safeguard Metals LLC and Jeffrey Santulan for violations arising from the fraudulent precious metals scheme and exorbitantly priced silver coins and for rendering unlawful investment advice.