Safeguard Metals LLC SEC Report:
Safeguard Metals LLC and its owner, Jeffrey Santulan, were charged today by the Securities and Exchange Commission with engaging in a multi-million dollar fraudulent scam involving hundreds of investors who were nearing retirement age.
According to the SEC’s complaint, 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 in 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 from December 2017 through at least July 2021.
According to the allegations, Safeguard falsely represented itself as a full-service investment firm with offices in London, New York City, and Beverly Hills, employing renowned securities industry figures and managing $11 billion in assets. Santulan allegedly ran the company from a modest leased space in a Woodland Hills, California, office building, employing sales people. The case also claims that Safeguard’s sales agents used scripts, some of which were authored by Santulan, that contained false and deceptive comments about how the market will crash and how their retirement savings would be frozen under a new ‘unpublicized’ regulation.
Safeguard and Santulan are also accused of deceiving investors about Safeguard’s commissions and markups on the coins, charging average markups of around 64% on its sales of silver coins, rather than the 4% to 33% markups given to investors. According to the complaint, Safeguard earned nearly $67 million through the sale of coins to over 450 largely elderly retail investors, while pocketing around $25.5 million in markups.
The SEC’s complaint, filed in federal district court in the Central District of California, accuses Safeguard and Santulan of violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and also accuses Santulan of aiding and abetting Safeguard’s violations and acting as a control person under Section 20(a) The SEC is requesting injunctions, disgorgement of allegedly ill-gotten gains, prejudgment interest, and civil penalties.
Jedediah B. Forkner and Jean M. Javorski of the SEC’s Chicago Regional Office conducted the investigation, which was overseen by Anne C. McKinley. Jonathan S. Polish will lead the litigation. The SEC thanks the Commodities Futures Trading Commission and state regulators who are members of the North American Securities Administrators Association for their help.
DFPI Sues to Stop $68 Million Precious Metals and Coin Fraud Targeting Elderly
SACRAMENTO, CA — The California Department of Financial Protection and Innovation (DFPI), in collaboration with the federal Commodities Futures Trading Commission (CFTC) and 26 other state agencies, filed a federal complaint in Los Angeles against a precious metals dealer and its owner as part of a countrywide campaign.
Safeguard Metals LLC and its founder and owner, Jeffrey Santulan, also known as Jeffrey Hill, are charged with soliciting about $68 million in money from more than 450 persons nationally to acquire illegally inflated metals and coins from its headquarters in Southern California. The lawsuit claims that Safeguard Metals made deceptive statements on its website, exaggerating its assets by billions of dollars and employing fear tactics to get older citizens to buy precious metals.
“California will not tolerate brazen attempts to target older folks or other vulnerable populations,” said DFPI Commissioner Clothilde V. Hewlett. “We hope the message has reached the precious metals business loud and clear: we will not tolerate deception and fraud in the commodities industry, and we are dedicated to holding bad actors accountable for their activities.”
The action requests a permanent injunction to prevent the deceptive and fraudulent activities, as well as disgorgement, full restitution, rescission, and civil monetary penalties. The SEC has filed a civil enforcement action against the same defendants, alleging violations of federal securities laws.
According to the complaint, Safeguard Metals violated the federal Commodities Exchange Act by targeting the elderly and urging them to liquidate their life savings and traditional retirement accounts in order to purchase the company’s grossly inflated and overpriced metals and coins. According to the lawsuit, the company and its owner misrepresented their credentials and advised customers that precious metals were a safe and conservative investment, as opposed to traditional retirement accounts, which sales associates acting on the company’s behalf claimed individuals could be locked out of if the stock market crashed.
Safeguard Metals and its sales employees are accused of defrauding consumers by convincing them to move cash from retirement accounts, typically liquidated securities, to self-directed individual retirement accounts known as “SDIRAs” for the purchase of precious metals. Safeguard Metals also fraudulently influenced certain customers to make cash and credit sales purchases. The alleged $68 million plan took place between October 2017 and at least July 2021, including $26 million in markups alone.
Customers allegedly experienced an immediate loss on their investments because Safeguard Metals charged high markups and drastically exaggerated the price of the coins offered. According to the complaint, Safeguard Metals charged an average markup of 71 percent on precious metals, and more recently 51 percent. The corporation disclosed customer markups of 23 percent and later up to 42 percent, referred to as “operational margins.” Almost 97 percent of Safeguard Metals’ sales came from naive buyers who bought overpriced silver coins with substantially larger markups than gold coins.
This joint civil enforcement action against the precious metals dealer is believed to be the second of its sort, following a case launched by the CFTC and state authorities against Metals.com and its proprietors, Lucas Asher and Simon Batashvili, in 2020.
The DFPI invites consumers who have been subjected to unfair, illegal, misleading, or abusive financial service provider activities to file a complaint with the Department online at https://dfpi.ca.gov/file-a-complaint/.
In addition to commodities, the DFPI licenses and regulates state-chartered banks and credit unions, money transmitters, the offer and sale of securities and franchises, broker-dealers and investment advisers, nonbank installment lenders, payday lenders, mortgage lenders and servicers, escrow companies, Property Assessed Clean Energy (PACE) program administrators, debt collectors, credit repair and consumer credit reporting companies, debt-relief companies, debt-relief companies, and debt relief companies.