Woodland Hills metals dealer settles lawsuit over $68 million in scam investments – Daily News

on Oct29
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Woodland Hills-based Safeguard Metals has settled a lawsuit filed by California and 29 other states that accused the company of scamming the elderly into buying $68 million in overpriced silver coins and other precious metals.

Though the company boasted publicly that it had $11 billion in assets and locations in London and Beverly Hills, it actually handled less than $75 million in business since its formation in 2019 and only had a single call center located in the Warner Center Towers in Woodland Hills, according to the complaint.

Safeguard even set up fake employee accounts on LinkedIn with exaggerated qualifications as part of the scam, state and federal regulators said.

“Safeguard Metals engaged in fraudulent and deceptive practices to solicit millions of dollars primarily from elderly and retirement-aged individuals for profit,” said Clothilde V. Hewlett, a California Department of Financial Protection and Innovation commissioner. “As a result, customers suffered substantial losses on their retirement investments.”

Under the terms of the settlement, Safeguard and its owner, Jeffrey Ikahn, agreed to a permanent injunction prohibiting them from violating state and federal laws relating to commodities fraud, investment fraud and unlicensed investment advice.

The two parties agreed to similar terms when settling a separate lawsuit from the Securities and Exchange Commission earlier this year.

Ikahn, a Tarzana resident, went by the pseudonym “Jeff Hill” when speaking with customers and legally changed his name from Jeffrey Santulan in 2021. Neither Safeguard, nor Ikahn, ever registered with the Commodity Futures Trading Commission, or the respective state agencies.

As part of the settlement, Ikahn is further barred from owning, or working for, any investment firm, broker, or commodities adviser in California, from working in the securities industry in the other states, and from trading in commodities at the federal level.

Ikahn and Safeguard neither denied, nor admitted, to the allegations against them, per the settlement, though they agreed the findings can be used against them in this and other court actions, according to Department of Financial Protection and Innovation. The settlement specifically bars both from publicly denying the facts established by the case.

The next phase of the litigation will determine how much the two parties will have to pay in customer restitution and civil penalties, according to the DFPI.

California, the U.S. Commodity Futures Trading Commission and 29 other state regulators sued Safeguard and Ikahn in February 2022. The complaint alleged Safeguard charged an average markup of 71% on the precious metals, despite listing much smaller percentages for its “operating margin” in documentation provided to customers.

Over a roughly four-year period, Safeguard intentionally pushed inexperienced investors to buy silver specifically and took about $66 million in total from the more than 450 customers nationwide it tricked into investing in those markedup coins.

After the initial overcharge, Safeguard tacked on additional storage fees and collected up to 10% in commission.

In total, the company kept more than a third — or roughly $25.5 million — of the investments.

The costs were so high that customers immediately took a significant loss. One investor in Idaho emptied her 401(k) and paid $592,000 for 9,953 silver coins and 52 gold coins through Safeguard.

“However, these coins were transferred the same day to the investor’s Equity Trust account at a value of only $326,402.83,” the settlement states. “This represents a markup of $241,385.75 or 74%.”

Safeguard’s employees, using sales scripts and email templates allegedly created by Ikahn, frequently lied or exaggerated to try to create fear around traditional retirement accounts, telling prospective clients that they could lose all of their investments if the market crashed. Simultaneously, employees downplayed the risks associated with investing in precious metals.

Like others, the company convinced one California investor to liquidate $111,000 from his traditional retirement account and invest it into a “self-directed individual retirement account” or SDIRA, in which Safeguard was the “only party authorized to buy or sell the precious metals,” according to the lawsuit.

“To benefit its own self-interest, Safeguard Metals directed the vast majority of SDIRA funds into certain coins that Safeguard Metals marked up excessively,” the lawsuit states.

A second California investor was convinced to put 25% to 50% of her retirement funds into precious metals.

When customers received account statements showing significantly lower values than they paid, Safeguard’s sales representatives told them the listed values were inaccurate and urged them to wait six months, or, in some instances, three to five years, for the accounts to grow. Two custodians of the SDIRA funds later terminated their business relationships with Safeguard as a result of the discrepancies.

The Commodity Futures Trading Commission has issued an advisory about precious metals fraud. The warning states to be wary of sales pitches from “metal dealers” or “merchants” that promise large gains with little risk and says to never provide personal information to such individuals.

Anyone concerned about potential fraud can contact the CTFC at 866-366-2382, or visit the National Futures Association’s website to verify a company’s registration, background and disciplinary history, the advisory states.

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