Gold Dealer Called a Ponzi Scammer
LOS ANGELES (CN) - Discount Gold Brokers, of Sherman Oaks, shorted a customer of 1,500 coins in a $176,000 order as part of a nationwide Ponzi scheme, the North Carolina man claims in court.
Thomas Hendrix sued Discount Gold Brokers and its manager Michael Berman in Federal Court.
Hendrix claims the defendants defraud victims by selling them large orders of precious metals, then failing to deliver the coins, or sending only a partial order and pocketing the difference.
According to the 12-page lawsuit, the Better Business Bureau has received 60 complaints against the brokers.
"Defendants use the U.S. Postal Service, wire transfers and television and radio advertising to perpetrate their criminal scheme to defraud buyers," the complaint states.
On April 15, 2013, the California Department of Corporations ordered Discount Gold Brokers to desist and refrain until it complied with a state requirement to deliver coins within 28 days.
Hendrix claims he bought 2,560 coins for $175,973 on Dec. 12, 2012 and was promised delivery within 8 weeks.
Months later, Hendrix says, he received the first of four partial deliveries, but by the end of 2013, the defendants were still 1,500 coins light.
And, by the time he took the first delivery in April 2013, Hendrix says, the value of the coins had decreased.
For that reason, Hendrix says, he canceled his contract, called Berman and told the company that he would no longer accept the coins and wanted a refund.
Though the refund was confirmed in writing, the gold brokers never returned his money, Hendrix says.
"Defendants never had any intent of fulfilling its obligations pursuant to the agreement. To the contrary, defendants at all times intended to defraud plaintiff by shipping him partial and incomplete portions of his order, stretched out over many months, all the while ignoring plaintiff's complaints and inquiries, all in a concerted effort to cause plaintiff to abandon his order and accept a loss," the complaint states.
He seeks treble damages and punitive damages for breach of contact, breach of faith and fair dealing, unjust enrichment, promissory fraud and intentional misrepresentation.
He is represented by Brian Lysaght of Santa Monica.