The Securities and Exchange Commission (SEC) has made charges against Safeguard Metals and its owner, Jeffrey Santulan, for engaging in a multi-million-dollar fraudulent scheme involving hundreds of investors who were at or near retirement age.
According to the SEC’s complaint, from December 2017 through at least July 2021, Safeguard and Santulan “acted as investment advisers and persuaded investors to sell their existing securities”, “transfer the proceeds into self-directed individual retirement accounts”, and “invest the proceeds into gold and silver coins by making false and misleading statements about the safety and liquidity of the investors’ securities investments, Safeguard’s business, and its compensation”.
The SEC allege that Safeguard “fraudulently marketed itself as a full-service investment firm with offices in London, New York City, and Beverly Hills that employed prominent individuals in the securities industry and had $11bn (£8.12bn, €9.73bn) in assets under management.
However, the SEC said that Santulan “operated the company from a small, leased space in a Woodland Hills, California office building using sales agents”.
The complaint also said that Safeguard’s “sales agents used prepared scripts, some written by Santulan, that were filled with false and misleading statements about how the market was going to crash and how their retirement accounts would be frozen under a new ‘unpublicised’ law”.
Kathryn Pyszka, an associate director in the SEC’s Chicago regional office, said: “The federal securities laws prohibit deceptive conduct and material misrepresentations in the purchase or sale of securities.
“We will take action when, as alleged, parties fraudulently induce investors to sell their securities through lies and deception.”
The SEC added: “Safeguard and Santulan also allegedly misled investors about Safeguard’s commissions and markups on the coins, charging average markups of approximately 64% on its sales of silver coins, instead of the 4% to 33% markups that they disclosed to investors.
“According to the complaint, Safeguard obtained approximately $67m from the sale of coins to more than 450 mostly elderly, retail investors, and kept approximately $25.5m in mark ups.”
The SEC’s complaint, which was filed in federal district court in Los Angeles, charges Safeguard and Santulan with violating the antifraud provisions of the federal securities laws.
The US regulator is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains, plus interest, and civil penalties.