DALLAS (CN) — The federal Commodity Futures Trading Commission and 30 states announced Friday a lawsuit against three Los Angeles-based precious metal dealers for allegedly scamming over 1,300 elderly investors in a $185 million scam where they were charged 100% to over 300% more than market prices.
The securities regulators sued Metals.com operator TMTE Inc., Chase Metals LLC, Chase Metals Inc., Barrick Capital Inc. and principals Lucas Asher and Simon Batashvili on Sept. 22. Unsealed Friday afternoon, the complaint lists 30 counts including state securities fraud, commodities fraud, investment adviser fraud and financial exploitation of the elderly. The plaintiffs claim the scam dates to 2017 and involved convincing the elderly victims to transfer their retirement savings to self-directed individual retirement accounts to purchase precious metals.
According to the plaintiffs, nearly every investor “lost the vast majority of their funds” on deposit with the defendants.
“Defendants falsely told investors who questioned the grossly inflated cost of the precious metals bullion after purchase that the precious metals bullion were exclusive and collectible numismatic or semi-numismatic precious metals that carried a premium far above the base melt value of the precious metals bullion.”
The plaintiffs claim Metals.com marked up the price of one-half ounce Silver Royal Canadian Mint Polar Bear bullion by 213% over spot prices, constituting 58% of sales for over $102.4 million. (page 14) They allege a 120% charge over spot prices for one-tenth ounce Gold Royal Canadian Mint Polar Bear bullion, constituting 15% of sales for over $31.2 million.
Metals.com also failed to disclose to investors that it was subject to at least 12 separate state enforcement actions and disciplinary proceedings dating back to 2019, the plaintiffs say.
Barrick Capital and Chase Metals did not immediately respond to email messages requesting comment Friday afternoon. Metals.com defended the company’s pricing, stating it sells bullion for cheaper than the U.S. Mint does on its website.
“Metals.com has customers from all ages, even as low as 18 years old, and from all political leanings, who enjoy physical coins delivered to them,” the company said in a statement. “We have among the lowest spreads on retail and wholesale prices in our industry between 1% and 29%.”
The defendants’ assets are currently frozen by U.S. District Judge David Godbey, who entered a restraining order Tuesday to permit the plaintiffs to inspect the defendant’s records. He also appointed a receiver to take control of Metals.com, Barrick and relief defendant Tower Equity, in addition to the assets of Asher and Batashvili.
Texas Attorney General Ken Paxton blasted the defendants Friday for flouting a 2019 agreement with the state to refund 84 investors’ money and strengthen company compliance and training.
“I will not stand by as these companies use deceptive tactics and underhanded attempts to siphon cash from Texans who seek only to wisely invest their hard-earned retirement savings,” Paxton said in a statement. “The abuse of hardworking Texans, particularly senior citizens who look forward to a secure retirement, cannot be allowed to continue. Companies that take advantage of Texans will be held accountable.”
The CFTC said the lawsuit is the “largest joint filing” in the agency’s history with state regulators and the first since a 2018 information-sharing agreement with the North American Securities Administrators Association — a group of state and provincial securities regulators in the United States, Canada and Mexico.
“This case highlights just how geographically broad commodities fraud can be in our rapidly-evolving financial markets and how important it is for regulators at all levels of government to work together to pursue bad actors and protect market participants,” said CFTC chairman Heath P. Tarbert in a statement.