Funds stolen from tax-deferred retirement accounts
Commodity Futures Trading Commission (CFTC) ……
The Commodity Futures Trading Commission (CFTC) and the California Department of Financial Protection & Innovation (DFPI) announced on September 28, 2023 a joint civil enforcement action in the U.S. District Court for the Central District of California against precious metals dealer Regal Assets LLC, its owner and CEO Tyler G. Gallagher, and its former President Leah Donoso, charging them with misappropriating more than $21 million USD in a nationwide fraud scheme.
The complaint charges the defendants with misappropriating customer funds to purchase precious metals from Regal Assets. The majority of the funds came from the customers’ tax-deferred retirement accounts. Regal Assets was a California limited liability company with its principal office in Beverly Hills, California and a second office in Waco, Texas. Gallagher’s last known residence was in the Los Angeles area, and Donoso currently resides in Texas.
In the continuing litigation, the CFTC and the DFPI seek disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), CFTC regulations, as well as various provisions of state law.
Case Background
The complaint alleges from approximately November 2019 through October 2022, the defendants engaged in a scheme to defraud people throughout the United States in connection with the sale of precious metals. As the complaint alleges, Regal Assets solicited customers to transfer funds from their tax-deferred retirement accounts, including individual retirement accounts (IRAs), 401(k) plans, and/or the U.S. Government Thrift Savings Plans, to purchase precious metals from Regal Assets through self-directed IRAs. Regal Assets also solicited and accepted other funds from customers to purchase precious metals.
The complaint further alleges that, rather than using all of the customers’ funds to purchase precious metals, the defendants misappropriated more than $21 million from more than 120 customers. In doing so, the defendants made knowing or reckless fraudulent misrepresentations and omissions to customers, including using forged documents, in order to conceal their misappropriation and maintain their fraudulent scheme.
In addition, the complaint alleges the defendants used customer funds to pay for, among other things, Regal Assets’ business expenses, salaries, and bonuses for Gallagher and Donoso (including over $860,000 in precious metals for Donoso), Gallagher’s competitive video gaming business, and his multi-million-dollar Beverly Hills home. The complaint further alleges the defendants also misappropriated customer funds to pay down balances on loans of more than $6 million and to make Ponzi-like payments to older customers using new customer funds.
The CFTC thanks its co-plaintiff in this action, the DFPI, for its assistance.
The CFTC Division of Enforcement staff responsible for this action are Rishi Gupta, Brendan Forbes, Kara Mucha, Erica Bodin, Daniel Jordan, and Rick Glaser.
[The following video is a segment from syndicated TV news show Inside Edition published on June 6, 2023. —CoinWeek]
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CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.
The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found at NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10% and 30% of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
