The California Department of Financial Protection and Innovation (DFPI), in partnership with the federal Commodity Futures Trading Commission (CFTC) and 29 other state regulators, filed a lawsuit against a precious metals dealer and its owner for perpetrating a $68 million fraudulent scheme that targeted the elderly.
The defendants solicited investors to dissolve their life savings and traditional retirement accounts in order to invest in highly inflated and overpriced precious metals bullion products sold by Safeguard Metals. Investors lost a majority of their funds, the complaint alleges.
The Complaint
Money Metals Exchange is a company that provides various precious metals for sale. They also provide a variety of storage options for customers to keep their precious metals safe.
Its website contains live price updates that let you view prices in real time. They also offer pre-made portfolios for newcomers to bullion investing.
The company’s customer service is available via phone and email during business hours. They’re open Monday through Friday 7:00 AM to 5:30 PM MT, and on Saturdays 7:30 AM to 3:30 PM MT.
Their website also includes a FAQ section that can answer your questions about the company’s services. However, you may need to wait for an answer because their support is limited during weekdays only.
The firm’s ratings on the Better Business Bureau and Trustpilot are positive, with a 4.7 out of 5-star credibility score based on 78 reviews. But there aren’t many reviews on the company’s Facebook page.
The Defendants
The defendants in the case were Goldman Sachs, JPMorgan Chase & Co, London Metal Exchange and the warehouse operators. The plaintiffs alleged that they artificially inflated the price of zinc, which is used in making galvanized steel.
The plaintiffs allege that the defendants bilked 450 investors, many of whom were senior citizens. These customers allegedly transferred money from their retirement portfolios to self-directed individual retirement accounts (SDIRAs) to purchase precious metals, and were then charged inflated prices that were often 100 percent or more above the prevailing market value of the metals.
The defendants also allegedly misrepresented to customers the fundamental nature of their investments by telling them that they were investing in physical metals, rather than futures contracts, and charging a fictitious storage fee despite their customers having no metals to store. The defendants allegedly made these representations in brochures, websites, brokers and account-opening documents, and they had the knowledge that their customers intended to invest their funds in futures.
The Lawsuit’s Settlement
A lawsuit settles when a party agrees to pay something now in exchange for dropping the case. This can be a risky process for the plaintiff, who may not receive as much money as they would have if they won their trial.
Often, settlements are made after the plaintiff’s lawyer submits a demand for compensation and the defendant responds with a counter-offer that is lower than the plaintiff’s initial offer. Then, the plaintiff and defendant work out a final settlement amount that both parties agree to.
This is a good example of how lawsuits can be resolved without resorting to a trial. Moreover, the settlement agreement provides some reassurance to the plaintiff that he or she will get compensation for their injury if the lawsuit does go to trial. It also allows both sides to resolve their disagreements without a messy trial, which can be stressful for both parties. The judge will decide whether to finally approve the settlement.
The Court’s Decision
In a decision published on Tuesday, Judge Katherine Forrest dismissed the money metals exchange lawsuit as being outside the scope of the Foreign Sovereign Immunities Act. The court reasoned that the London Metal Exchange is an “organ of the United Kingdom government” and therefore immune from suit.
However, a number of lawyers who are representing plaintiffs in the case have said that they will appeal the decision. They say the court’s ruling is counterintuitive, considering the LME is a private company subject to extensive regulation.
In a lawsuit brought by Elliott Management, the hedge fund accused the LME of violating its human rights when it suspended trading in nickel. Elliott argued that the decision was arbitrary and irrational and amounted to an unlawful interference by a public body.
