CFTC and State Regulators Enter Consent Order with California Precious Metals Dealer in $68 Million Fraud

The Commodity Futures Trading Commission (CFTC) and 30 state securities regulatory agencies affiliated with the North American Securities Administrators Association (NASAA) have jointly 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). The order finds them liable for orchestrating a nationwide fraudulent scheme, valued at $68 million, involving the sale of overpriced silver coins to elderly and retirement-aged individuals.

The consent order, entered in cooperation with the CFTC and NASAA, has not only found the defendants liable for fraud but has also imposed injunctive measures. The order prohibits Safeguard Metals and Ikahn from committing future violations of the Commodity Exchange Act (CEA) and CFTC regulations, future violations of state laws and regulations, and engaging in trading activities or registering with the CFTC and the states involved in the action. The determination of restitution, disgorgement, and civil monetary penalties is reserved for future consideration by the court or through consent.

Targeting Elderly Victims

The defendants' fraudulent activities spanned from around October 2017 through at least July 2021, during which they solicited and received roughly $68 million in investments. The majority of these funds were retirement savings collected from approximately 450 individuals, many of whom were elderly, with the promise of investing in precious metals, primarily silver coins.

The order reveals that the defendants' scheme involved luring customers into purchasing precious metals through false and misleading statements. They made deceptive claims about the safety and risks associated with investments in traditional retirement accounts, ultimately convincing customers to acquire silver coins at prices that included substantial and undisclosed markups. In an egregious example, customers paid an average markup of 71%, despite the customer agreement stipulating a maximum markup of 23% on silver coins. These inflated markups resulted in immediate and significant financial losses for customers. To cover their fraudulent activities, the defendants also misled customers about the genuine value of the silver coins they purchased.

Parallel Civil Action

In a separate, parallel action, on February 1, 2022, the Securities Exchange Commission (SEC) initiated a civil action against Safeguard Metals and Ikahn for their involvement in the fraudulent precious metals scheme and their overpricing of silver coins. The SEC's action also included charges related to providing unlawful investment advice. The defendants reached a similar consent order with the SEC on June 14, 2023, where they admitted liability. This order enjoined them from further violations and deferred decisions regarding disgorgement and civil monetary penalties.

The consent order marks a significant step in addressing the fraudulent actions of Safeguard Metals and Ikahn, who preyed on elderly individuals and retirement-aged investors, misleading them into making unwise financial decisions. This joint regulatory effort underscores the commitment to upholding the integrity of financial markets and protecting vulnerable investors. As the legal process unfolds, the financial community will closely monitor the actions and penalties imposed on the defendants, highlighting the importance of regulatory oversight in safeguarding investors' interests and maintaining market trust and credibility.