ST. GEORGE — Utah officials have charged a precious metals dealer and his company for defrauding at least 200 people across Utah and 16 other states.
Gaylen Dean Rust, of Layton, and his Salt Lake City company Rust Rare Coin are accused of fraudulently obtaining more than $170 million from investors since May 2013 in a precious metals Ponzi scheme.
Rust and Rust Rare Coin were charged by the Commodity Futures Trading Commission and the Utah Department of Commerce, Division of Securities. A restraining order freezing Rust’s assets was issued Thursday by a U.S. district court judge.
Rust allegedly embezzled the money from his friends, customers and business associates, according to a press release from the Utah Department of Commerce.
And according to Utah officials, Rust’s fraud has been ongoing – $42 million was received by Rust and his company from investors between January and August. As recently as Oct. 8, Rust allegedly attempted to solicit more investors.
“The defendants allegedly concealed their fraud with false account statements and Ponzi payments,” CFTC enforcement director James McDonald said. “However, their scheme was brought to light through the combined efforts of the CFTC and our law enforcement partners.”
Rust was able to defraud the money from investors by tricking them into believing he and his company were pooling investor money to buy silver, according to the complaint. Rust and his company allegedly told the investors he would sell silver held in the pool as market prices rose and when market prices dropped he would buy silver.
Rust allegedly told the investors this would lead to “extraordinarily high profits,” but officials said it was all a sham.
Rust provided false account statements that made it look like he was being profitable in every trade, officials said. He also allegedly told investors that the silver pool possessed approximately $77 million to $80 million of silver that was stored in depositories in Salt Lake City or Los Angeles, even though officials said there is no record of Rust purchasing or storing anything close to that amount at those locations.
Instead of buying silver with the investors’ money, Rust is accused of using these funds to make payments to other investors, transfer money to other companies owned by Rust and pay for other personal expenses.
Those attempting to access the website for Rust Rare Coin are now met with a message saying the store is closed.
According to a biography on Brigham Young University’s website, Rust started working at Rust Rare Coin when he was 8 and he started running the business when he was 21. As founder and president of the Legacy Music Alliance, Rust was also an entrepreneur and philanthropist who was “giving back to the Utah community through generous donations to college music programs throughout the state,” according to the BYU biography.
Rust also founded a website for teens who are members of The Church of Jesus Christ of Latter-day Saints, called yourLDSneighborhood.com, according to a 2007 KSL article. However, navigating to that website now shows the domain being available for sale.
In addition to freezing Rust’s assets on Thursday, the court also appointed Jonathan O. Hafen as a temporary receiver to take control of the company and the corporate relief defendants, as well as the assets of Rust and the individual relief defendants. Hafen is a trial lawyer for Parr Brown Gee & Loveless in Salt Lake City, as well as chairman of the board of directors for Tuacahn Center for the Arts.
Officials from the Utah Department of Commerce were not accepting requests for news interviews for St. George News to find out if anyone in Southern Utah was affected by the alleged fraud.
People can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement by calling 866-366-2382 or filing a tip or complaint online.
Email: [email protected]
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