The Commodity Futures Trading Commission and 30 state securities regulatory agencies that are members of the North American Securities Administrators Association (NASAA) today announced 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 fraudulent scheme, involving the sale of fraudulently overpriced silver coins that targeted 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.”
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.
The following state regulatory agencies and state officials are the CFTC’s co-plaintiffs in this action and the CFTC appreciates their cooperation: Alabama Securities Commission; Arizona Corporation Commission; Arkansas Securities Department; California Department of Financial Protection & Innovation; State of Connecticut Department of Banking; State of Florida, Office of Financial Regulation; State of Hawaii, Department of Commerce and Consumer Affairs; Idaho Department of Finance; Office of the Secretary of State, Illinois Securities Department; Indiana Securities Division; Iowa Insurance Commissioner Douglas M. Ommen; Kentucky Department of Financial Institutions; State of Maryland Ex Rel the Maryland Securities Commissioner; Attorney General Dana Nessel on Behalf of the People of the State of Michigan; Mississippi Secretary of State; Missouri Commissioner of Securities; Nebraska Department of Banking & Finance; New Mexico Securities Division; The People of the State of New York by Letitia James, Attorney General of the State of New York; North Carolina Department of the Secretary of State; Ohio Department of Commerce, Division of Securities; Oklahoma Department of Securities; Oregon Department of Business and Consumer Services; South Carolina Attorney General; South Dakota Department of Labor & Regulation; Commissioner of the Tennessee Securities Department of Commerce and Insurance; Utah Division of Securities; Vermont Department of Financial Regulation; Washington State Department of Financial Institutions; and the State of Wisconsin.
The Division of Enforcement (DOE) staff responsible for this action are Steve Turley, Paul Flucke, Jeff Le Riche, Christopher Reed, and Charles Marvine, and former staff member Clemon Ashley. DOE worked in partnership with enforcement authorities from NASAA member agencies, led by the Alabama Securities Commission and the California Department of Financial Protection and Innovation.
CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories and Articles, 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 company. A company’s registration status can be found using 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 CFTC Whistleblower Office. Whistleblowers may be eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC 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 what to consider before making gold-related investments, as well as the NASAA Senior Investor Resource Center, which helps older investors protect themselves against investment fraud.
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 on the regulator in each jurisdiction, visit the NASAA website.
