Securities and Exchange Commission v. Belmont Reid & Company, Inc., John Disterdick, Bernard Zahren, and Walter Skrondal

The Securities and Exchange Commission (SEC) appeals from the district court’s grant of summary judgment in favor of defendants John Disterdick, Bernard Zah-ren, and Walter Skrondal. The SEC contends that the defendants’ sale of gold coins on a prepayment basis was actually an investment contract, and therefore a security. We affirm.

I.

FACTS AND PROCEEDINGS BELOW

The economic conditions out of which this case developed were those of the late 1970s and early 1980s, during which time the inflation rate was high and the demand for gold as a hedge against inflation was strong. In 1980, Continental Minerals Corporation (CMC), a closely-held Nevada corporation that developed natural resources, had assets that included several partially developed leasehold interests in what were allegedly gold-bearing properties. In order to develop some of these properties, CMC tried various means of raising capital. One of its attempts involved raising capital by selling its gold directly to investors. The gold was to be in the form of coins or medallions that it planned to mint from future gold production. The coins consisted of two types. Purchasers could buy a set of twelve one-ounce coins that…