W. Hollywood Firm Probed in Sale of Coins

The state Department of Corporations is investigating a West Hollywood company for allegedly bilking thousands of investors out of millions of dollars since December, 1982, by illegally selling securities, department officials say.

Investigators from the department and the Los Angeles District Attorney’s office on Wednesday served a search warrant at the Sunset Boulevard office of Coinex International, which sells contracts for coins and precious metals to investors over the telephone.

When investigators arrived Wednesday morning at Coinex’s offices, they found between 70 and 75 salesmen pitching the coin contracts by telephone, according to Dorene Wolf, a Department of Corporations senior counsel. They seized 70 boxes of corporate and financial records, computer records, advertising materials and other items, she said.

The Department of Corporations is beginning to analyze the records seized but is not yet able to determine how many investors are involved, Wolf said.

Took a While

“Our estimate is that there are thousands of investors because someone ran the investor list through the computer and it took several minutes just to get through the Bs,” she said.

The Department of Corporations estimates that Coinex took in about $34 million over the last seven months, Wolf said.

No arrests have been made and no charges have been filed. Coinex Chief Executive Edward Mazur was not in his office Friday and no other company officials were available for comment.

An affidavit filed last week in Los Angeles Superior Court said the search warrant was sought because of possible felony violations of state securities laws by Coinex and its principals.

Specific Allegations

Specifically, Coinex and its officers allegedly sold investment contracts to the public even though the securities were not qualified by the Department of Corporations, allegedly made untrue statements or omitted material facts in the sale of securities, and allegedly committed grand theft by “using investors monies for their own account and personal benefit,” the affidavit said.

Coinex also has done business under the names of Domaine Precious Metals & Coins, Domaine Consultants, Domaine Numismatics, Domaine Productions and Northwind Enterprises.

Investors were told that the contracts, primarily for gold and silver coins, could be had for only a 50% down payment. They were told that after a certain period they could liquidate the contracts, roll them over or pay the other 50% and take possession of the coins, the affidavit said.

Investors were told that Coinex charges a 3% commission on profits, but salesmen never mentioned that the company also charges a 30% spread between the purchase price and the selling price, the affidavit said.

The contracts “are sold in such a manner that the investor had to rely on the expertise of Coinex to make a profit,” Wolf said.

The Department of Corporations acted because it has received dozens of complaints from Coinex investors located all over the country who say were not told about the 30% markup, have been unable to liquidate their contracts or whose checks from Coinex have bounced, she said.

One investor named in the affidavit was Ralph Frates, who spent more than $150,000 on contracts to buy coins from Coinex beginning in mid-1983, the affidavit stated. The Fullerton resident said he is still not sure what his losses totaled.

His investment is “gone, gone, gone,” said Frates, a Standard Oil retiree who says he is “over 70”.