Precious Metals Firm Red Rock Secured Hit with $56M Penalty for Fraud

A federal court has ordered Red Rock Secured LLC, CEO Sean L. Kelly and senior salesperson Anthony “Tony” Spencer to pay over $56 million after defrauding customers in a nationwide precious metals investment scam. The Commodity Futures Trading Commission announced that Judge R. Gary Klausner of the U.S. District Court for the Central District of California entered a consent order on April 23rd finding the defendants liable for fraudulent misrepresentations and unlawful investment advice referenced to the sales of precious metals.

From December 2019 to June 2022, Red Rock and its salespeople convinced at least 950 individuals to buy over $69 million of Canadian Red-Tailed Hawk silver and gold coins. Most of the victims were retirement savings customers, with coins marked up by Red Rock between 92% and 130% of the company’s acquisition prices. Red Rock concealed the excessive mark-ups, with salespeople like Spencer mentioning much smaller 1-5% mark-ups on regular bullion before directing them to the maximally overpriced “premium” RTH coins.

The defendants also claimed that Red Rock had a “direct relationship” with the Royal Canadian Mint to purchase RTH at well-priced “wholesale prices” and “transfer those savings” to consumers, where the company ultimately purchased from a wholesaler.

CFTC Enforcement Director Ian McGinley stated that “the defendants scammed elderly victims into liquidating retirement accounts to jump their savings into this precious metals scam. The victims were of advanced years and should have enjoyed their retirement, not remained scammed by fraudsters.”

The court's order requires Red Rock, Kelly and Spencer to collectively pay $38.9 million in restitution to defrauded customers, disgorge $5.1 million in ill-gotten gains, and pay $12.25 million in civil penalties. It also imposes permanent trading and registration bans in CFTC markets against the defendants, while barring Kelly and Spencer from acting as investment advisers or brokers in California and Hawaii.

The CFTC coordinated the case with the California Department of Financial Protection & Innovation and Hawaii's securities regulator. The U.S. Securities and Exchange Commission also recently filed a related civil suit. The case underscores intensified regulatory scrutiny over abusive sales tactics in the precious metals investment markets.

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