U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25996 / May 7, 2024
Securities and Exchange Commission v. Red Rock Secured LLC, Sean Kelly, Anthony Spencer, and Jeffrey Ward, No. 2:23-cv-3682-RGK-PVC (C.D. Cal. filed May 15, 2023)
SEC Obtains Final Judgment Against Red Rock Secured, Three Executives in $50 Million Scheme Targeting Retirement Account Holders
SEC Obtains $76 million Judgement Against Red Rock Secured and Executives Who Schemed to Defraud Retirement Account Holders
On April 23, 2024, the United States District Court for the Central District of California entered a final consent judgment against defendants Red Rock Secured (which now operates under the name American Coin Co.), its CEO Sean Kelly, and managers Anthony Spencer and Jeffrey Ward, ordering defendants to pay more than $76.4 million dollars in disgorgement, interest, and penalties. The judgment resolves the SEC’s charges against defendants for their roles in a scheme to defraud retirement account holders out of more than $50 million in connection with defendants’ sales of gold and silver coins between 2017 and 2022.
According to the SEC’s complaint (filed on May 15, 2023, and amended on August 11, 2023), since at least 2017, the defendants repeatedly solicited investors through false and misleading statements, telling them to “protect” their retirement savings by selling securities held in their retirement accounts—including federal employee Thrift Savings Plan accounts, 401(k) plans, and Individual Retirement Accounts—to invest in gold or silver coins at only a 1 to 5 percent markup. The complaint alleges that in reality, Red Rock charged as much as 130 percent in markups on the precious metal coins they sold to investors. Through this scheme, defendants allegedly defrauded at least 700 investors out of more than $50 million.
Without admitting or denying the SEC’s allegations, defendants consented to entry of a final judgment permanently enjoining them from violations of the antifraud provisions of Section 10(b) the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisers Act of 1940; ordering Red Rock to pay disgorgement in the amount of $50,150,000, plus prejudgment interest thereon in the amount of $6,110,000, and $10,000,000 in civil penalties; ordering Kelly to pay disgorgement in the amount of $1,841,727.89, plus prejudgment interest thereon in the amount of $224,241.37, and $1,500,000 in civil penalties and prohibiting Kelly from serving as an officer or director of a public company; ordering Spencer to pay disgorgement in the amount of $2,156,905.15, plus prejudgment interest thereon in the amount of $262,616.15, and $580,478.70 in civil penalties; and ordering Ward to pay disgorgement in the amount of $1,224,215.28, plus prejudgment interest thereon in the amount of $149,055.46, and $200,464 in civil penalties.
The Commodity Futures Trading Commission (“CFTC”) and California and Hawaii state regulators, the California Department of Financial Protection and Innovation and the Hawaii Department of Commerce and Consumer Affairs also obtained a final judgment in their parallel action, CFTC et al. v. Red Rock Secured LLC, Shade Johnson-Kelly a/k/a Sean Kelly, and Anthony Spencer, No. 2:23-CV-03680-RGK-PVC (C.D. Cal. filed May 15, 2023). The amounts owed by Red Rock, Kelly, and Spencer to the SEC will be offset by any payments they make to the CFTC in connection with its final judgment.
The SEC’s investigation was conducted by Michael Ellis and Elzbieta Wraga of the SEC’s New York Regional Office and was supervised by Hane L. Kim and Tejal D. Shah of the New York Regional Office. Alex Lefferts of the Enforcement Division’s Office of Investigative and Market Analytics assisted with the investigation. The SEC’s litigation was led by Jack Kaufman, Debra Jaroslawicz, and Corinna Provey Adamson, under the supervision of Ms. Shah, Preethi Krishnamurthy, Ms. Kim, and Liora Sukhatme, and with the assistance of Ms. Wraga, Nicole Forbes, Rachna Kapur, and Craig Messing.