The state Department of Commerce and Consumer Affairs has joined a federal lawsuit in Los Angeles against the Southern California-based precious metals dealer Red Rock Secured, its principal and owner Shade Johnson-Kelly and sales agent Anthony Spencer.

What You Need To Know

  • The plaintiffs allege that Red Rock Secured fraudulently solicited an estimated $61.8 million in funds from more than 950 customers nationwide. 

  • The defendants are also accused of defrauding hundreds of customers into transferring funds in their tax-deferred retirement accounts, 401(k) plans and U.S. Government Thrift Savings Plan, then using those funds to purchase precious metals from Red Rock through self-directed IRAs between November 2019 and February 2022

  • According to DCCA, the scheme included approximately $34.4 million in markups alone

  • The plaintiffs are seeking a permanent injunction to stop what they allege are deceptive and fraudulent practices as well as the surrender of any profits from illegal acts, full restitution, cancellation of customer contracts and civil monetary penalties

DCCA’s Securities Enforcement Branch, along with the federal Commodity Futures Trading Commission and the California Department of Financial Protection and Innovation, allege that the defendants fraudulently solicited an estimated $61.8 million in funds from more than 950 customers nationwide. The plaintiffs also allege that they defrauded hundreds of customers into transferring funds in their tax-deferred retirement accounts, 401(k) plans and U.S. Government Thrift Savings Plan, then used those funds to purchase precious metals from Red Rock through self-directed IRAs between November 2019 and February 2022.

“Protecting investors is a core part of the Securities Enforcement Branch’s mission,” said Acting Commissioner of Securities Ty Nohara. “As this action demonstrates, we are committed to holding bad actors accountable for their actions.”

According to DCCA, the scheme included approximately $34.4 million in markups alone. This inflated the price of the precious metals sold—representing markups of up to 130%, and caused customers to suffer an immediate loss to their investments, the suit alleges. The suit alleges that customers were led to believe Red Rock’s markup on the precious metals was between 4% and 29% and as low as 1% in some instances.

The plaintiffs are seeking a permanent injunction to stop what they allege are deceptive and fraudulent practices as well as the surrender of any profits from illegal acts, full restitution, cancellation of customer contracts and civil monetary penalties. The Securities and Exchange Commission has already filed a civil enforcement action against the same defendants and another individual alleging violations of federal Securities Laws.

Investors who suspect they have been targeted by similar precious metals investment schemes are encouraged to contact the DCCA’s Securities Enforcement Branch at (808) 586-2740 or via electronic mail at seb@dcca.hawaii.gov.

Michael Tsai covers local and state politics for Spectrum News Hawaii.