SALT LAKE CITY — U.S. and state attorneys have accused a Layton man and his company of running a $170 million Ponzi scheme victimizing hundreds of silver investors.
In a pair of civil suits filed last week in U.S. District Court in Salt Lake City, Gaylen Dean Rust and Rust Rare Coin are said to have promised annual returns of 25 to 40 percent for investments in a silver pool.
Some investors received investment income, but millions of dollars allegedly were diverted for personal uses such as mortgage payments or were funneled into other companies controlled by Rust, such as a horse racing business, according to court documents.
Judge Tena Campbell signed an order Nov. 15 granting a government motion to freeze the defendants’ assets and appoint a temporary receiver to manage the assets pending the outcome of the case.
Rust, 59, is president and director of Rust Rare Coin, which was founded by his father in 1966. The company specialized in money from the early Church of Jesus Christ of Latter-day Saints, according to a complaint filed Nov. 15 by the U.S. Securities and Exchange Commission.
In the second case, the U.S. Commodity Futures Trading Commission and the Utah Division of Securities, represented by the state attorney general, seek a permanent injunction against the silver investment operation and sanctions against Rust and the company for alleged fraud and dealing in unregistered securities.
Court documents as of Monday afternoon did not list an attorney representing Rust or the company.
The CFTC case said there are at least 200 victims in at least 16 states since 2013. The SEC case listed 300 victims since 2017.
“As alleged, for at least a decade, the defendants defrauded their friends, customers, and business associates (and) allegedly concealed their fraud with false account statements and Ponzi payments,” said a prepared statement by CFTC enforcement director James McDonald.
As early as 2008, Rust tricked investors into believing their money was used to build up a silver pool to be sold as market prices rose, and that silver would be bought as prices fell, according to the CFTC suit.
Rust told investors the pooled silver was stored in Brink’s depositories, but that claim was false, the CFTC alleged.
The SEC suit said Rust and the company raised $85 million since January 2017.
Rust told investors he had access to a trading algorithm that enabled him to capitalize on fluctuations in the price of silver bullion and thereby make profitable trades, regardless of the actual price of silver, the FEC alleged.
Further, the SEC complaint said, “Rust claimed that he had a personal relationship with a commodity analyst at a large global bank and that Rust obtained information from this analyst regarding when that bank and other market participants planned to sell large quantities of physical silver, driving down market prices.”