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HomeCrime and FraudOwners of Rust Rare Coins Receive Criminal Indictments for Alleged Ponzi Scheme

Owners of Rust Rare Coins Receive Criminal Indictments for Alleged Ponzi Scheme

Rust Rare Coins

By Hubert Walker for CoinWeek ….
On Wednesday, May 8, a federal grand jury in the U.S. District Court for the District of Utah returned six criminal indictments against a family at the middle of an alleged $200 million Ponzi scheme. Husband and wife Gaylen Dean Rust and Denise Gunderson Rust of Layton, both 59 years old, and their son, Joshua Daniel Rust of Draper, 37, were each charged with wire fraud conspiracy and money laundering conspiracy. Gaylen Rust also received two counts of securities fraud, while Denise and Joshua received one charge each of money laundering.

If convicted, all three defendants are facing time in federal prison.

Details of the Case

In November 2018, the U.S. Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), along with the Utah Division of Securities, filed a civil complaint against Gaylen Rust and his family coin shop, Rust Rare Coin. Additionally, U.S. District Judge Tena Campbell entered a restraining order that froze the assets of Rust and his company.

A month later, the government amended its complaint to include Denise and Joshua as co-defendants. Denise Rust was employed as a secretary for Rust Rare Coin, while Joshua served as the shop’s manager from 2004 to November 15, 2018.

Overall, the government alleged that the Rust family and Rust Rare Coin defrauded 500 or more investors in 17 different states of at least $200 million. The conspiracy as outlined in Wednesday’s indictment is alleged to have been active from as early as 1996 through November 15, 2018. The Rusts are alleged to have made false statements to investors and prospects via email, telephone, the postal service, and in person – with the most recent attempt occurring on October 8, 2018, just over a month before the government’s action.

Even though Gaylen Rust was not licensed to sell securities, trade commodities, or operate a commodity pool, he convinced potential investors that his company was pooling together capital to buy and trade silver and pay the dividends of such activity to his investors. Rust promised 20 to 25% percent returns on investment and claimed to be holding a large amount of silver in Brink’s warehouses; both statements were false. No investor money was used to buy silver, and no silver was ever placed in a physical depository by Rust Rare Coin. Rust also failed to inform investors that their money would be used for other purchases and investments other than buying silver. Indeed, a sizeable portion of funds the company raised for the commodity pool (at least $150 million) were actually used to pay dividends to previous investors.

Rust is also said to have exploited his membership in the Church of Jesus Christ of Latter-Day Saints to defraud fellow churchgoers.

In addition to Rust Rare Coin, the Rust family owned and managed R Legacy Entertainment LLC; R. Legacy Racing, Inc.; R Legacy Investments LLC; R Legacy Ranch; and Legacy Music Alliance, which he used to donate to school music programs in the state. The Rusts are also alleged to have spent investor money on racehorses.

In a related matter, 20 investors and victims of the alleged Rust family Ponzi scheme sued Salt Lake City-based Zions Bank in January 2019 as part of a federal class-action lawsuit that alleges the bank “aided and abetted” Rust by failing to investigate the suspicious pattern of activity associated with his account. Zions Bank is reviewing its actions and claims to be cooperating with authorities.

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Hubert Walker
Hubert Walker
Hubert Walker has served as the Assistant Editor of CoinWeek.com since 2015. Along with co-author Charles Morgan, he has written for CoinWeek since 2012, as well as the monthly column "Market Whimsy" for The Numismatist and the book 100 Greatest Modern World Coins (2020) for Whitman Publishing.

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