After receiving over 250 consumer fraud complaints, Santa Monica filed a consumer protection lawsuit against Superior Gold Group, a gold coin dealer, in 2010. Customers claimed the company was taking their money, but had received nothing in return.
The city placed Superior Gold Group under a preliminary injunction, freezing their accounts and assets, once the lawsuit was filed. A receiver was appointed to control the business’s books; however, prosecutors were unable to find any records of assets to be used to reimburse customers.
Sands’ attorney claimed that Superior Gold Group was a victim of its own success, unexpectedly falling behind on orders, but having assets frozen before the company could fill any backlogged orders. The company experience a substantial boom from 6 figure revenue in 2007 to almost $20 million in 2009. In 2010, the company was losing too much money and unable to fill backorders.
The trial was to take place later this year, but the city was able to reach a settlement last month. With the recent settlement, owner Bruce Sands will be required to pay $200,000 up front, and a percentage of his net income in the following years totaling $2 million. Unfortunately, this does not cover a majority of the $7 million in claims received by the city. Though less than desired, prosecutors agree that whatever little money is available will be given directly to consumers, much quicker than if they had gone to trial.
Interestingly, this is the second time that Santa Monica announced settlements with a precious metal retailer in the last year. The previous settlement being with Goldline for $4.5 million and a 5 year injunction that requires Goldline to modify its business practices.