CFTC stands by its action against Safeguard Metals
The Commodity Futures Trading Commission (CFTC) has stood by its action against Safeguard Metals, which is charged in connection with a $68 million fraudulent scheme.
On July 22, 2022, the regulator filed its opposition to a motion to dismiss by the defendants in this case.
The complaint charges defendants Safeguard Metals LLC and its principal, Jeffrey Santulan a/k/a Jeffrey Hill with executing an ongoing nationwide fraud that solicited and received approximately $68 million in investor funds to purchase precious metals and fraudulently overpriced silver coins. Safeguard Metals is located in Woodland Hills, California, and Jeffrey Santulan resides in Tarzana, California.
The complaint alleges that from approximately October 2017 and continuing through at least July 2021, the defendants fraudulently solicited and received approximately $68 million in customer funds—the majority of which was retirement savings—from at least 450 persons throughout the US for the purpose of purchasing precious metals, primarily consisting of gold and silver coins.
The CFTC notes that it sufficiently alleged that defendants transacted business as investment advisers (IA) and/or investment adviser representatives (IAR) in Alabama, Arkansas, California, Connecticut, Florida, Idaho, Illinois, Kentucky, Maryland, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Utah, and Vermont, without obtaining the necessary registration.
IAs such as Safeguard that engage in internet communications, such as by having a website and sending emails, may be considered “transacting business” in a state, and must be registered unless they provide express and specific disclosures and meet other requirements.
All the defendants must do to “transact business” is to offer, provide, or direct any act instrumental in providing investment advice to or from that State. Since Defendants offered and rendered investment advice from their California headquarters to investors in each State, they must be registered in California and each State where they have clients.
Plaintiffs provided 35 detailed examples of unlicensed investment advice rendered to clients from California directed to various states. Thus, the 17 States alleging unlicensed IA or IAR activity sufficiently plead that Defendants provided investment advice to their citizens, which required Defendants to be licensed in the respective States.
The CFTC requests that the Court deny the defendants’ Motion to Dismiss in full.