Gold IRA Ponzi paid for luxury cars, esports team, CFTC says

Regal Assets and its owners pilfered $21 million from clients, the CFTC and California DFPI allege.

It’s a story that has become too common: An investor, often retired, transfers a big chunk of their 401(k) or IRA to buy gold and in doing so ends up losing a lot of money.

A new lawsuit from California and the Commodity Futures Trading Commission comes with a grim twist: Tens of millions of dollars worth of clients’ assets are missing — not because they were overcharged or bought worthless products — but because a large portion of theirr retirement funds was allegedly misappropriated to finance luxury cars, a house in Beverly Hills and an outlandishly big esports team.

The company at the center of the fraud, Regal Assets, went dark nearly a year ago. And its owner, Tyler Gallagher, appears to have fled the country.

That’s according to the lawsuit filed Wednesday by California’s Department of Financial Protection and Innovation and the CFTC, which names former company president Leah Donoso as a defendant along with Regal Assets and Gallagher.

The allegations point to a Ponzi scheme in an industry that, as a result of myriad instances of older people being targeted for questionable or unsuitable products, has a public relations problem.

Last month, for example, a group of states approved a bankruptcy plan for precious metals firm Lear Capital that includes $5.5 million in restitution for thousands of clients who moved money out of retirement accounts and incurred high fees for exposure to gold. And recently the CFTC filed enforcement actions against firms that pushed gold coins with inflated values on vulnerable buyers who cashed out of IRAs.

Along with regulators, financial advisors have cautioned about investing in gold and especially about using retirement assets to buy purportedly rare coins or physical gold with marked-up prices and high fees associated with storage.

The case against Regal is different. Although the firm did purchase gold on behalf of clients, it allegedly set aside half or more of the many purchase orders and used the money to pay back other clients. In other cases, money was allegedly misappropriated for purchases or other uses.

Gallagher allegedly used more than $1 million to bankroll his esports, or competitive video-gaming, team. The team, which he started in 2021, was among the biggest, at 30 players, with a roster of well-known names that commanded big paychecks, according to reporting by The Daily Beast. That publication earlier this year ran a feature detailing numerous clients’ experiences with Regal Assets. About 70 are part of a Facebook group called “Victims of Regal Assets,” while many have filed unresolved complaints with the Better Business Bureau and some have filed lawsuits against Regal, Gallagher and Donoso.

“The vast majority of the funds Regal Assets misappropriated were from customers’ retirement funds in their [self-directed] IRA accounts. Many of these customers were elderly or retired individuals who would have great difficulty trying to rebuild their retirement savings,” the plaintiffs wrote in the lawsuit. “By at least November 2019, defendants’ misappropriation of customer funds left Regal Assets with insufficient funds to acquire all of the precious metals it owed to its customers.”

The misappropriations allegedly included more than $800,000 in mortgage payments for Gallagher’s Beverly Hills home, $150,000 paid to his girlfriend, $150,000 for services such as a personal driver, and $170,000 used to settle a lawsuit involving a purchase of box seats at a sports arena, according to the complaint. Gallagher also allegedly used money for a Cadillac Escalade, a Tesla, housing for a girlfriend and hundreds of thousands in salaries and bonuses that included precious metals. In all, an estimated $21 million was misappropriated from 120 people, according to the suit.

“By the spring of 2022, an increasing number of customers began contacting Regal Assets to request information as to why the precious metals they purchased had not been credited to their [self-directed] IRA accounts,” the plaintiffs wrote.

Gallagher, Donoso and others sought to reassure clients, explaining that the funds were tied up or in some cases providing doctored transfer receipts, the plaintiffs allege.

Eventually, clients had difficulty reaching Gallagher and Donoso, and Regal appeared to have shut down. As of Nov. 30, the company’s bank accounts “had a combined negative balance of approximately $413,” according to the complaint. And “on information and belief, Gallagher left the United States in or around the fall of 2022.”

A spokesperson for California Department of Financial Protection and Innovation said in an email that the department “do[es] not have any information to share” about Gallagher’s whereabouts and directed questions to the CFTC. The latter group did not respond to a request for comment about Gallagher or how victims in the alleged scheme would eventually be compensated.