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SALT LAKE CITY — The man behind one of Utah's largest ever Ponzi schemes, which netted over $200 million from victims, now knows his sentence.
Gaylen Dean Rust, 62, was ordered Tuesday to serve 19 years in federal prison after he pleaded guilty in December to felony counts of wire fraud, money laundering and securities fraud. Rust was also ordered to pay a staggering $153 million to the 568 victims in the case.
Rust was ordered to report to a federal prison by Wednesday, according to the Utah U.S. Attorney's Office.
A federal grand jury indicted Rust, his ex-wife Denise Rust, and their son Joshua Rust in May 2019 on numerous fraud and money laundering charges, after investigators alleged that the three orchestrated a silver trading Ponzi scheme that bilked hundreds of victims for over $200 million.
In a news release Tuesday, the Utah Department of Commerce called Rust's actions one of the biggest consumer harms the department has ever seen.
"Ponzi schemes absolutely destroy trust in the investment industry," said Margaret Busse, the department's executive director, in a prepared statement. "Without trust, individuals aren't willing to participate in future opportunities and that affects our entire economy."
Ponzi schemes absolutely destroy trust in the investment industry. Without trust, individuals aren't willing to participate in future opportunities and that affects our entire economy.
–Margaret Busse
In a plea agreement, Rust admitted that he owned and operated Rust Rare Coin in Salt Lake City from 2002 until 2018. In 2008, Rust began a "silver trading program" that was fraudulent and operated as a Ponzi scheme, according to the U.S. Attorney's Office. Rust told investors he could make money by the buying and selling of silver bullion and that 100% of investor funds would go toward the buying of silver.
Over the years, investors gave Rust around $225 million, though Rust admitted that he used money from newer investors to pay older investors — the hallmark of a Ponzi scheme — and give the appearance that the trading program was profitable. The U.S. Attorney's Office said Rust told investors that by using algorithms, he never had a month where he lost money, and that even the worst year yielded a 12% return.
In reality, Rust had little to no silver and had not stored silver since 2016. Charging documents allege that Rust diverted investor money for his personal businesses or his personal use. Rust also admitted that in January 2016 he opened three personal accounts at Zions Bank and used the accounts to launder roughly $18 million. Some investors would later file a lawsuit against Zions Bank, alleging the bank helped Rust continue the fraud scheme.
"We hope that a 19-year prison sentence and an order to pay over $153 million sends a message to the community that the U.S. Attorney's Office is committed to prosecuting financial crimes," said Utah U.S. Attorney Andrea Martinez in a statement. "Those who defraud their family, friends and associates out of their hard-earned savings will be held accountable."
In addition to Rust's sentencing on Tuesday, his son Joshua Rust, 39, pleaded guilty to misprison of wire fraud conspiracy, according to a statement in advance of his plea. The document indicates Joshua Rust could face a maximum prison sentence of up to three years, a $250,000 fine and three years of supervised release. However, his sentence will more likely be up to 18 months in prison or five years of probation.
In June 2020, Denise Rust, 61, pleaded guilty to a money laundering charge, and she was later sentenced the following September to 18 months in prison with three years of supervised release. She described herself as an "unwitting pawn in Gaylen's world" during her sentencing hearing.
Correction: An earlier version incorrectly stated Joshua Rust pleaded guilty to wire fraud instead of misprison of wire fraud conspiracy.
