Utah Man Sentenced for $153M Silver Trading Scheme
SALT LAKE CITY – Gaylen Dean Rust, 62, of Layton, was sentenced to 19 years in federal prison by a U.S. District Court Judge on Tuesday, March 9, 2022, after being convicted of conspiracy to commit wire fraud, conspiracy to commit money laundering, and securities fraud. Rust was ordered to pay over $153 million dollars to the 568 victims of his criminal scheme, and an order of forfeiture in the same amount was entered against Rust for all money and assets owned by Rust and traceable to the criminal scheme.
In the plea agreement with federal prosecutors, Rust admitted that he was the owner and operator of Rust Rare Coin, Inc. (RRC) in Utah, from 2002 until 2018, and that he had previously worked as the manager of the business. Rust admitted that beginning in 2008, he began a scheme to defraud investors by inducing them to invest in RRC’s fraudulent “silver trading program.” However, Rust’s “silver trading program” operated as a Ponzi scheme. Rust admitted to selling investments in the fraudulent program to approximately 500 investors located throughout the United States in amounts totaling $225 million dollars. Rust admitted that he paid out money from later investors to earlier investors to create the impression that his “silver trading program” was profitable and to keep the scheme operating.
Rust carried out the fraudulent scheme by explaining to victims that RRC’s silver trading program was a lucrative investment that involved the buying and selling of actual silver bullion; that 100% of investor funds would be used to buy actual silver; that all the silver bullion purchased would be stored at Brinks Global Services in Salt Lake City or Los Angeles; and, that RRC was storing almost $80 million dollars of silver bullion at Brinks.
Rust further told investors that all of the silver trades were conducted through an RRC account at HSBC Bank; that profit generated in trades would be used to repurchase a larger amount of silver at a lower price, thereby continually increasing the amount of silver for investors; and, that by using algorithms, the silver trading program had never experienced a losing month, much less a losing year, and that the worst year had generated a 12 percent return, and that the average rate of return was 20 percent to 25 percent per year.
However, Rust had little to no silver stored at Brinks; Rust had not stored silver bullion at Brinks since 2016, and no meaningful investor funds were ever used to purchase silver bullion during the scheme; RRC had no mechanism to generate meaningful returns on silver trading; and HSBC Bank had never maintained an account on behalf of RRC. Rust diverted nearly all investor funds to other businesses, personal uses, and to making payments to previous investors. Rust also admitted that in January of 2016, he opened three personal accounts at Zions bank and used these accounts to launder approximately $18 million dollars from the fraudulent trading scheme.
“We hope that a 19-year prison sentence and an order to pay over $153 million dollars sends a message to the community that the U.S. Attorney’s Office is committed to prosecuting financial crimes,” said United States Attorney Andrea T. Martinez. “Those who defraud their family, friends, and associates out of their hard-earned savings will be held accountable. Unfortunately, the reality of these cases is that victims’ money is nearly always spent by the perpetrator of the crime or paid out to other victims. This should be a stark reminder to all Utahns that it is imperative to vet your financial advisor or anyone who attempts to persuade you to invest in their business or financial dealings.”
“Gaylen Rust betrayed the trust of his hundreds of clients, many of them his own family, friends and members of his church. For years, he lived his life on their hard-earned money,” said Special Agent in Charge Dennis Rice of the Salt Lake City FBI. “Mr. Rust’s actions are a stark reminder of the devastating consequences of financial crimes and the importance of protecting our communities from these types of schemes.”
Key Facts
- State: Utah
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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