By Lookout Staff

December 3, 2015 -- The City Attorneys office has obtained a $2 million judgement against a Santa Monica-based coin dealer accused of running a nationwide "bait and switch" scam, City officials announced Thursday.

Seacoast Coin, Inc., also known as Merit Financial and Merit Gold and Silver, agreed to a settlement on the eve of its trial in a lawsuit filed in February 2014 by Santa Monica's Consumer Protection Division.

It is the third judgment against a locally based dealer for allegedly using misleading sales tactics to trick consumers into buying overpriced gold and silver coins, said Adam Radinsky, Chief Deputy City Attorney for Consumer Protection.

Consumers who responded to a TV ad offering gold bullion at 1 percent over cost were agressively switched into buying non-bullion coins at around 20 to 40 percent over cost, according to the suit filed in February 2014.

The consumers were told the non-bullion coins were a better investment, provided tax advantages, offered greater “privacy” and could not be “confiscated” by the government, all false claims, the lawsuit alleged.

“The gold coin industry is unregulated – it’s like the Wild West,” Radinsky said. “These businesses don’t need licenses and they aren’t bonded.

"Consumers often feel embarrassed and hopeless with no place to turn for help, even after being scammed out of huge amounts of money,” he said.

High-pressure sales tactics are not uncommon in an industry that offers a popular investment to unsuspecting consumers willing to invest between $50,000 and $100,000, and sometimes much more, Radinsky said.

"Many of Merit’s customers rolled over their 401(k) and other retirement accounts into gold," Radinsky said, adding that the lawsuit alleged that "after being talked into buying Merit’s overpriced “proof” gold coins for their IRAs, these consumers saw their investment accounts drop in value 25 percent or more overnight."

One of the nation's largest precious metals dealers, Merit spent millions on national TV ads promoting the sale of gold and silver coins before going out of business in Agust 2014, Radinsky said.

“With Merit no longer operating, our goal in this case was to get as much money as possible back to consumers,” said Radinsky.

The judgment was part of a final settlement of the City Attorney’s false advertising lawsuit against Merit. The lawsuit also named as defendants the company’s co-owners, Peter Epstein and Michael Getlin.

The judgement against Merit follows two jusgements in 2012 obtained against Goldline International and Superior Gold Group, which were accused of similar charges.

Goldline, which is still in business under a court -appointed monitor, agreed to give more than $5 million in refunds, while Superior Gold was ordered to pay $2 million in restitution to customers and was shut down and placed under receivership, City officials said. Its former owner is facing criminal charges.

“Santa Monica, for whatever reason, has been the hub of the U.S. gold coin industry,” said Radinsky. “We’ve had many of the nation’s largest dealers based here.

"Until federal laws are passed to protect consumers of gold coins, we’ll use all laws at our disposal to crack down on deceptive practices – and hope that other jurisdictions follow suit.”