On Wednesday, October 25, 2023, the Commodity Futures Trading Commission (CFTC) and 30 state securities regulatory agencies that are members of the North American Securities Administrators Association (NASAA) announced the entry of a consent order in the U.S. District Court for the Central District of California against Safeguard Metals LLC and Jeffrey Ikahn (formerly Jeffrey Santulan a/k/a Jeffrey Hill), finding them liable for operating a nationwide $68 million USD fraudulent scheme involving the sale of overpriced silver coins that targeted the elderly and retirement-aged people.
In addition to finding the defendants liable for fraud, the order enjoins them from future violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged; future violations of state laws and regulations, as charged; and from trading or registering with the CFTC and the states in this action. The order further reserves determination of the amounts of restitution, disgorgement, and civil monetary penalty for future decision by the court or by consent.
“The defendants targeted elderly victims to liquidate their retirement savings to invest in a precious metals scam,” said Director of Enforcement Ian McGinley. “Working closely with the 30 state co-plaintiffs, this resolution as to liability is a critical step in addressing the defendants’ fraud.”
Precious Metals Fraud Case Background
The order finds Safeguard Metals and Ikahn executed a nationwide fraud, from approximately October 2017 through at least July 2021, in which the defendants solicited and received approximately $68 million in investor funds. The majority of the funds were retirement savings solicited from approximately 450 people to purchase precious metals, primarily silver coins.
The order finds the defendants’ fraudulent scheme involved deceiving 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 prices that included grossly inflated price markups that vastly exceeded the price markups disclosed to customers. For example, customers paid an average markup of 71% when the customer agreement stated the defendants would charge a maximum markup of 23% on silver coins. These excessive markups caused customers an immediate and substantial loss on their investment. Also, to disguise their fraudulent scheme, the defendants misled their customers about the true value of the silver coins they purchased.
Parallel Civil Action
In a parallel, separate action, on February 1, 2022, the Securities Exchange Commission (SEC) filed a civil action against Safeguard Metals and Ikahn for violations arising from the fraudulent precious metals scheme and fraudulently overpriced silver coins, and for rendering unlawful investment advice. SEC v. Safeguard Metals, Case No. 2:22-cv-00693 JFW (C.D. Cal. Feb. 1, 2022). On June 14, the SEC entered a similar consent order with the defendants where they admitted liability. The consent order enjoined them from further violations, and allowed the amount of disgorgement and civil monetary penalty to be determined at a later date.
The CFTC and NASAA thank and acknowledge the assistance of the SEC.
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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.
NASAA’s Precious Metals Investor Advisory
NASAA and its members have issued a series of investor advisories, including an advisory on matters to consider before making gold-related investments.
Investors should also contact their state or provincial securities regulator with questions about any investment opportunity or the person offering it for sale before investing in the product. For contact information, visit the NASAA website here.
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