The Securities and Exchange Commission (SEC) has announced charges against Red Rock Secured LLC, a company based in El Segundo, California. Its CEO, Sean Kelly, and two formers Senior Account Executives Anthony Spencer and Jeffrey Ward were involved in this Red Rock Secured Lawsuit. These charges are related to an alleged fraudulent scheme that targeted hundreds of investors. Convincing them to sell securities in their retirement accounts and use the proceeds to purchase gold and silver coins. The defendants promised the investors that they would only face a markup of 1 to 5 percent when buying these coins. However, according to the SEC’s complaint, Red Rock Secured actually charged markups as high as 130 percent. Enabling them to pocket over $30 million out of the total of $50 million received from investors.
The SEC’s complaint, which was filed in the U.S. District Court for the Central District of California, accuses Red Rock, Kelly, Spencer, and Ward of violating various provisions. This includes Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Additionally, Kelly, Ward, and Spencer are charged with aiding and abetting Red Rock’s violations. While Kelly is also charged as a control person under Section 20(a) of the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, civil penalties, and an officer-and-director bar for Kelly.
Red Rock Secured Lawsuit: SEC’s Investigation Into The Matter
The SEC’s investigation into this matter was conducted by Michael Ellis and Elzbieta Wraga of the SEC’s New York Regional Office. Also under the supervision of Hane L. Kim from the Retail Strategy Task Force and Tejal D. Shah from the New York Regional Office. Alex Lefferts from the Enforcement Division’s Office of Investigative and Market Analytics assisted with the investigation. The litigation will be led by Jack Kaufman. The investigation was initiated by the SEC’s Division of Enforcement’s Thrift Savings Plan Initiative. This focuses on potential misconduct targeting the retirement accounts of government employees. The SEC acknowledges the assistance provided by the Federal Retirement Thrift Investment Board, the Commodity Futures Trading Commission, and state regulators who are members of the North American Securities Administrators Association.
In light of these charges, the SEC’s Office of Investor Education and Advocacy and the Division of Enforcement Retail Strategy Task Force has issued an Investor Alert. This alert provides tips to Thrift Savings Plan investors on how to avoid falling victim to fraudulent schemes.
More Details on the Lawsuit:
On May 15, 2023, the Commodity Futures Trading Commission (CFTC) took legal action by filing a complaint in the U.S. District Court for the Central District of California against Red Rock Secured, LLC (Red Rock), Shade Johnson-Kelly (also known as Sean Kelly), and Anthony Spencer. The complaint alleges that the defendants engaged in a scheme to defraud individuals across the United States. Specifically, they marketed precious metals, particularly silver and gold Canadian Red-Tailed Hawk (RTH) coins, to customers while misleading them about the significantly high mark-ups being charged. These markups consistently ranged from 100% to 130%. Disturbingly, the defendants convinced hundreds of customers, including many older individuals. Moreover, they convinced them to invest their retirement funds in these overpriced RTH coins. In total, Red Rock collected approximately $34.4 million in markups from approximately 959 customers. This is based on approximately $61.8 million in sales.
The CFTC has taken numerous actions against fraudsters who attempt to deceive Americans and exploit their hard-earned money through aggressive marketing and inflated mark-ups, particularly in the precious metals market, including collectible coins. This becomes particularly problematic when retirees are persuaded to deplete their retirement accounts to invest in these products, which are often presented as “safe” or promising higher returns. The CFTC’s Office of Customer Education and Outreach has released advisories cautioning individuals about common frauds in this area, and it is strongly recommended that customers exercise caution before investing in precious metals, especially when using their essential retirement savings.
Commissioner Kristin N. Johnson expresses gratitude to the Division of Enforcement staff, including James A. Garcia, Michael Loconte, Daniel C. Jordan, and Rick Glaser, for their diligent efforts in pursuing this case.
Red Rock Secured Lawsuit: Do you know about CFTC?
The CFTC refers to the Commodity Futures Trading Commission. It is an independent agency of the United States government responsible for regulating and overseeing the commodities and futures markets. The CFTC’s primary goal is to protect market participants from fraud, manipulation, and abusive practices within these markets. It ensures the integrity and transparency of these markets by enforcing regulations and promoting fair competition. The CFTC also educates the public about the risks associated with trading commodities and works to maintain the overall stability of the derivatives markets.
What is DFPI?
The Department of Financial Protection and Innovation (DFPI) is a regulatory agency in the state of California, United States. Its primary focus is to protect consumers, regulate financial services, and encourage responsible innovation within the financial industry. The DFPI’s mission is to safeguard consumers by establishing and enforcing financial regulations that promote transparency and accountability. This includes overseeing various financial services providers such as banks, credit unions, money transmitters, mortgage lenders, and other entities operating in California. By enforcing these regulations, the DFPI aims to ensure that consumers have access to a fair and equitable financial marketplace.
In addition to regulation, the DFPI plays a role in consumer education. It empowers Californians by providing them with information and resources to make informed financial decisions. Through educational initiatives, the DFPI aims to prevent potential risks, fraud, and abuse in the financial sector. To learn more about the DFPI and its efforts to protect consumers and foster responsible financial practices, you can visit their website at dfpi.ca.gov.
Red Rock Secured Lawsuit: Conclusion
The Commodity Futures Trading Commission (CFTC)’s lawsuit against Red Rock Secured, LLC Sean Kelly and Anthony Spencer is a grave matter. It accuses them of engaging in a scheme to defraud individuals by misleading them about mark-ups on precious metal coins. The defendants allegedly overcharged customers by approximately $34.4 million.
The CFTC is actively pursuing cases related to deceptive practices in precious metals investments. Further developments in the lawsuit will reveal the legal outcomes and potential penalties.
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