Salt Lake City Precious Metals Dealer Engaged in $170M Ponzi Scheme

The CFTC, along with the Utah Department of Commerce, Division of Securities, through its Attorney General, jointly filed a civil enforcement action in the U.S. District Court for the District of Utah, Central Division. They filed against Gaylen Dean Rust and his business Rust Rare Coin (RRC). The complaint charges Rust and his company with committing fraud against approximately 200 individuals from Utah, and also from 16 other states. Rust allegedly obtained more than $170 million from investors since May 2013 in a precious metals ponzi scheme.

The complaint states that Rust’s fraudulent actions are ongoing. From January to August of 2018, Rust received $42 million from investors, which he claimed he used to buy and sell silver. He also allegedly attempted to solicit new investors recently.

On November 15, 2018, the U.S. District Court Judge for the District of Utah, Honorable Tena Campbell, entered a restraining order to freeze Rust’s assets and to permit the CFTC and State of Utah to inspect his records. Jonathan O. Hafen was appointed as a temporary receiver to take control of RRC and Rust’s assets.

The complaint states that Rust’s fraudulent actions began in 2008 and have continued into the present time. He allegedly tricked investors into believing that their money was being used to buy and sell silver, and that each investor’s share of money would increase with the value of the silver as the market price went up. He told them that by trading with silver in this way, they were going to make very generous profits, averaging 20 to 25 percent per year. He even told some of the investors they might make a profit of 40 percent per year.

Rust created false account statements that showed his silver trades were profitable. The investors believed that the alleged $80 million in silver that RRC generated was stored at Brink’s Incorporated in Salt Lake City and in Los Angeles. However, Rust never purchased or stored anything matching that amount in Brink’s.

The money from investors was never used to purchase silver. Instead, it was allegedly used to pay Rust’s personal expenses, to transfer money to Rust’s other companies, and to pay other investors.

The CFTC and the State of Utah want Rust’s ill-gotten gains, restitution, permanent trading bans, civil monetary penalties, and permanent injunction against further violations against Utah Securities Laws.

Silver Law Group is a nationally-recognized securities law firm headquartered in South Florida representing investors worldwide with their claims for losses due to securities and investment fraud. Our precious metal fraud attorneys have successfully pursued claims for losses in gold, silver, commodities and futures. The firm has successfully recovered multi-million dollar awards for its clients through securities arbitration and the courts. To contact Scott L. Silver to discuss your legal matter, call toll-free (800) 975-4345 or e-mail him at SSilver@silverlaw.com.