The Federal Trade Commission charged a telemarketing operation with running a deceptive investment scheme that took in at least $10 million from mostly elderly consumers, many of whom invested their retirement savings buying precious metals on credit without knowing the costs and risks.
According to the FTC's complaint against defendants Sterling Precious Metals LLC, Matthew Meyer, Francis Ryan Zofay and Kerry Marshall, consumers were told they could earn large profits quickly by investing in precious metals with very little risk of loss, without telling customers of the likelihood that they would have to pay more money later or lose their investment.
The FTC alleges that most of the defendants' customers lost money. Likewise, consumers lost the equity in their investments through the accumulation of fees and commissions, including storage fees and interest charges on the leveraged portion of their accounts. The FTC charged the defendants with violating the FTC Act and the FTC's Telemarketing Sales Rule.
As alleged in the complaint, the defendants failed to clearly disclose the investments' total cost, and often failed to disclose that about 80% of the purchase would be financed through a loan with interest.
The defendants also allegedly misrepresented or failed to clearly disclose fees and commissions, such as a $200 account opening fee and that consumers would be charged as much as 39% of their investments in commissions.
The defendants also failed to tell consumers they were likely to receive equity calls on their accounts. When a consumer's equity decreased to a certain level, an equity call was issued, and the consumer had to invest more money or allow the investment to be liquidated at a loss. In some cases, consumers were not told their accounts were liquidated.