The Bay State’s chief securities regulator has brought charges against a Wyoming company for an alleged scheme that liquidated Massachusetts residents’ retirement accounts to purchase gold and silver coins, while collecting excessive markup fees.
Massachusetts Secretary of the Commonwealth William F. Galvin announced Dec. 3 that he had brought charges against TMTE, Inc., which sells precious metals under the name of Metals.com, among others. Galvin’s Enforcement Section alleges that the company engaged in “fraud and unregistered advisory activity,” as well as made a materially false or misleading filing in violation of the Massachusetts Uniform Securities Act and its corresponding regulations.
According to the complaint, TMTE collected markup fees in the range of 53%-63%, after convincing at least six Massachusetts investors from January 2008 to July 2019 to fully liquidate their retirement accounts and invest the proceeds in the precious metals.
“At no time did TMTE explain to Massachusetts residents that they should not invest their entire portfolios in precious metals,” the complaint states. “Instead, TMTE directed Massachusetts investors to fully liquidate their retirement accounts and invest the proceeds in precious metals, the resulting market value of which was substantially lower than the securities they held previously.”
What’s more, the complaint alleges that most, if not all, of the residents had no prior experience investing in precious metals, and consequently, were unaware of the differences between the various coins and the related markup fees. As a result, these investors paid a markup fee that was between 24.62% and 34.27% higher than TMTE’s own stated average of 29%, the complaint notes.
The six investors consequently experienced a total decline in their investments of more than $1.7 million, according to the complaint. Two of the investors, who were a married couple approaching retirement, lost more than $1.5 million immediately after the company used their retirement savings to purchase silver. The loss, according to Galvin, was a result of the markup fee TMTE collected, which amounted to 54% of the purchase price of the silver.
Galvin notes that even though the same two investors were initially hesitant to invest in precious metals, the couple verbally agreed to open IRAs to hold precious metals with a minimum account size of $500. Yet, despite this apparent verbal agreement, the complaint contends that TMTE used blank forms signed by the investors to facilitate the total liquidation of both investors’ retirement accounts.
Galvin further charges that after the couple discovered the unauthorized transfer of their assets, the company “resorted to using scare tactics” about the volatility of the market to convince the investors to keep their money invested in the precious metal IRAs.
The complaint seeks an order to require TMTE to disgorge all profits relating to the alleged wrongdoing described in the complaint and provide restitution to the investors. The Securities Division is also asking that TMTE be fined and permanently barred from advising Massachusetts residents to sell securities in order to purchase precious metals.
