Tenn. Commerce & Insurance Dept. Joins NASAA Members and CFTC in Settlement With Safeguard Metals in $68M Fraud Targeting Elderly Adults

NASHVILLE, Tennessee, Oct. 31 -- The Tennessee Department of Commerce and Insurance issued the following news:

The Tennessee Department of Commerce & Insurance's ("TDCI") Securities Division is among 30 state regulators and the Commodity Futures Trading Commission (CFTC) participating in a settlement with a precious metals dealer and its owner for operating a nationwide $68 million fraudulent scheme targeting elderly and retirement-aged persons.

The settlement resolves the federal lawsuit filed in February 2022 in the U.S. District Court for the Central District of California against defendants Safeguard Metals LLC and Jeffrey Ikahn. The Tennessee Attorney General's Office - on behalf of TDCI - joined the CFTC and other state regulators in filing the complaint.

"This settlement sends a strong statement that Tennessee investors have advocates with TDCI's Securities Division and our colleagues at the Tennessee Attorney General's Office who are seeking to protect hard-working consumers by holding bad actors in the precious metals industry accountable for their actions," said TDCI Commissioner Carter Lawrence. "I congratulate our Securities Division and the Attorney General's Office for their diligence and hard work regarding this case."

The consent order finds Safeguard Metals and Ikahn liable for executing a nationwide fraud involving the sale of fraudulently overpriced silver coins. The order also enjoins defendants from future violations of the Commodity Exchange Act and Regulations; future violations of state laws and regulations set forth in the complaint; and from trading or registering with the Commission and states as set forth in the complaint. The order further reserves determination of the amounts of restitution, disgorgement, and civil monetary penalty for future decision by the court or by consent.

In Tennessee, nine investors were defrauded out of $2,123,014.70 in the execution of this national scheme. Many Tennessee investors liquidated their existing retirement accounts, which contained securities, to obtain funds to purchase the metals.

"While this large-scale scheme impacted consumers across the United States, we should not forget that it victimized Tennesseans - people who might be our loved ones, friends, or neighbors," said TDCI Assistant Commissioner for the Securities Division Elizabeth Bowling. "I urge Tennessee investors to always check the registrations of investment products and professionals, ask questions early and often, and don't take promises about big returns on investments at face value."

The main findings of the order include:

* The defendants executed a nationwide fraud from approximately October 2017 through at least July 2021, soliciting and receiving approximately $68 million, the majority of which was retirement savings, from at least 450 persons for the purpose of purchasing precious metals, primarily consisting of silver coins.

* The defendants deceived customers into purchasing silver coins 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. As an example, customers paid an average price markup of 71 percent when the customer agreement stated that defendants would charge a maximum price markup of 23 percent on silver coins. These excessive markups caused customers an immediate and substantial loss on their investment.

* The defendants then continued to mislead their customers about the true value of the silver coins they had purchased to cover up their fraudulent scheme.

* In a parallel, separate action, on February 1, 2022, the U.S. 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. On June 14, 2023, the SEC entered a similar consent order with defendants, in which defendants admitted liability, that enjoined defendants from further violations, and which provided for the amount of disgorgement and civil monetary penalty to be determined later.

* Before making an investment, consumers are advised to:

* Exercise caution when purchasing precious metals and to check for high commissions, spreads, or markups as high as 30 to 70 percent.

* Verify the registration of all investment products and professionals, diligently research investments, ask tough questions about the fees, markups or spreads, risks, and potential returns.

* Questions about an investment? Contact TDCI's Securities Division at (615) 741-2947, 800-863-9117 (toll free), by email at [email protected], or visit us online (https://www.tn.gov/commerce/securities-division.html).

* * *

Original text here: https://www.tn.gov/commerce/news/2023/10/30/tdci-joins-nasaa-and-cftc-in-settlement-with-safeguard-metals-in-68m-fraud.html