Gold IRA Scams? If history has taught us anything, it’s that there will always be people and organizations attempting to take advantage of others through deception.
This is especially true in the realm of finance, where people are frequently searching for a quick buck.
The first method in preventing gold scams is to choose reliable gold IRA and precious metals companies. Gold has become increasingly popular as an investment vehicle in recent years, making it an ideal target for scammers looking to take advantage of folks who don’t grasp different fundamentals, such as what drives the price of gold.
It’s critical to be informed of the most prevalent gold scams and how to prevent them in order to avoid being taken advantage of. Additionally, using the correct investment applications to monitor the markets and remain on top of your assets might help you avoid becoming a victim of a scam. In this essay, I’ll go through some of the most typical gold investment scams and give you some advice on how to keep safe when investing in gold.
Gold Scams You Should Be Aware Of
A large counterfeit gold scandal focused on – you guessed it– Wuhan defrauded a number of mainland Chinese banking and shadow financial institutions.
Kingold, a jewelry company that was once large enough to be listed on the Nasdaq, put billions of gold bars with 14 different banks as collateral and borrowed $2.8 billion against them to participate in the Chinese real estate boom.
The issue: it appears that almost 83 tons of the gold collateral was phony.
When one of their lenders, Dongguan Trust, came into financial difficulties and had to call in their loan, the fraud was revealed. Kingold lacked the funds, not least since up to 65 million newly constructed homes are still empty, providing no rental income for investors. As a result, the bank began liquidating gold collateral.
The bank realized that several of the gold bars on deposit were made of gilded copper during an investigation. This incident had little direct impact on individual gold investors.
However, the size of the fraud — 83 tons of metal – demonstrates how much money and energy are invested in deception.
What chance does the average retail gold buyer or investor have if 14 well-known banks were so easily duped?
It turns out, though, that there is a lot you can do to protect yourself. You can’t, however, be a slacker or gullible. Gold and precious metals are regularly recommended as part of a retirement plan by financial consultants.
Physical gold and other precious metals, when combined with mutual funds, annuities, retirement funds, cash and retirement savings and pensions, and other assets, provide a strategy to diversify your portfolio against stock market risk, inflation, currency risk, and other risks.
The first step to protecting yourself against gold scams, precious metals fraud, and counterfeit rings is to understand these criminals’ various techniques and approaches to further their investment scams.
China is home to some of the world’s biggest and most sophisticated gold scams and counterfeit operations.
Non-Delivery Scams/Ponzi Schemes
Many gold scams take the form of a Ponzi scheme, in which scammers pocket their investors’ money instead of investing it as promised – paying out just enough to keep the fraud going.
In one such case, Northwest Territorial Mint’s owners took in millions in orders to deliver gold bullion coins.
But they defrauded their buyers by lying about shipping times, while they used the money to expand the fraud to other states and for their lifestyles.
They used the money from new orders to pay off older customers. According to the Justice Department, Northwestern Mint defrauded over 2,500 customers, resulting in total losses of more than $25 million – and 14 felony convictions. In another similar case, Hannes Tulving of Newport Beach, California, was president of The Tulving Company, which sold coins, bullion, and other precious metals over the Internet.
Again, Tulving’s scheme started with failing to deliver the gold and precious metals promised to customers. Instead, Tulving used their money to fund his lifestyle and keep the scam going for as long as he could. When customers demanded to know why their shipments hadn’t arrived, Tulving made various excuses and delivered the metal or refunded customers’ money only when they threatened legal action.
Tulving had already stolen almost $15 million from 380 different victims by the time the Justice Department got involved.
Life Lesson
Make a lot of noise right away. Even with legitimate sellers, there are times when deliveries are delayed.
However, if you feel like you’re being taken advantage of, it’s far better to demand a refund sooner rather than later, even if it means threatening legal action, than to be one of the last individuals left carrying the bag in a Ponzi scheme.
However, if you feel like you’re being taken advantage of, it’s far better to demand a refund sooner rather than later, even if it means threatening legal action, than to be one of the last individuals left carrying the bag in a Ponzi scheme.
Scams with ‘Rare Coin’ Valuation
Unscrupulous coin sellers may persuade consumers to acquire “rare,” “proof,” “uncirculated,” or collectors’ coins at exorbitant markups above spot prices in this common deception. Occasionally, the gold dealer will give a comparable coin with a lower value. The average customer is unable to distinguish between the two. A retired widow in her 70s got a $10,000 offer from a trader to purchase her collection of Swiss gold coins.
She agreed, and the coins were delivered to the dealer. However, the dealer informed her that the price of gold had dropped and that he could only offer her $8,500. She resisted and wanted her monies back since she sensed a rat. Until she threatened legal action, the dealer refused to refund her coins. After that, the dealer sent her a new set of coins.
She got the new coins assessed and discovered they were only worth $1,100.
Gold IRA Scams
In such situation, dealing with a gold IRA firm that routinely interacts with IRAs and other retirement funds is an excellent choice.
This is due to a number of factors:
- First, Congress and the Internal Revenue Service have imposed severe restrictions on the sorts of gold and precious metals that can be held in an IRA:
- Other than particular types of bullion coins, you can’t acquire jewels, jewelry, or collectibles for your IRA investment.
- All of your precious metals assets must be bullion coins, bars, or rounds that are fine enough and pure enough: Gold must be 99.5 percent pure, silver 99.9% pure, and platinum and palladium both must be 99.95 percent pure.
- A national government mint or an assayer, refiner, or producer that is recognized or certified by NYMEX, COMEX, NYSE/Liffe, LME, LBMA, LPPM, TOCOM, or ISO 9000 must generate precious metals IRA assets.
- Proof coins must be in perfect condition and come in their original mint packaging. They must also provide an authenticity certificate.
- Small bullion bars (those weighing less than 400 ounces of gold, 100 ounces of gold, 1000 ounces of silver, 50 ounces of platinum, and 100 ounces of palladium) must be made to exact weight standards.
- Non-proof (bullion) coins must be in perfect uncirculated condition and devoid of damage.
Even though the law prohibits collectibles and numismatic items in IRAs, some unscrupulous or unskilled precious metals merchants and salesmen may try to offer you numismatic collector coins, bars, or rounds for your individual retirement account.
These salespeople are only interested in making a profit. Assume you try to keep numismatics, collectibles, or unregistered coins in your personal retirement account.
The IRS may then disallow your whole IRA and order you to take a taxable distribution of the entire amount. This might result in a significant tax bill and penalties.
Affiliate Scams
In an affiliate scam, the criminal uses common affiliation to gain confidence before committing fraud on the mark. The fraudster frequently preys on other members of a church, synagogue, or veterans group.
People prefer to trust individuals who are similar to them, making them particularly vulnerable to con artists and fraudsters.
Larry Bates, for example, actively pushed his precious metals firm, First American Monetary Consultants, on Christian and Jewish television and radio stations with his wife and two kids.
He spoke at conferences and seminars around the United States, promoting precious metals investment to religious groups and instilling fear of an impending economic catastrophe.
He was a superb salesman: his consumers donated him and his company more than $87 million between 2007 and 2013.
He wasn’t, however, a good steward of their funds, according to the Justice Department, diverting their funds to pay his personal lifestyle and commodities trading.
To further promote his family’s schemes, he spent $4 million to establish the International Radio Network, a Christian media group, and constructed a 10,000-square-foot home on 300 acres in Tennessee.
By 2009, the firm had already defrauded clients out of $26 million in unfulfilled gold and precious metals purchases.
In the end, the family was sentenced to a total of 627 months in federal prison.
Religious associations aren’t the only ones who can benefit from the affiliate program. According to the Federal Trade Commission, African Americans and Latin Americans are similarly at risk of being used by crooks who prey on their confidence in fellow minorities.
Symptoms of a Gold Scam
- Anyone who claims that investing in gold isn’t dangerous should be avoided. Yes, it is. The price of gold fluctuates on the market. Investing in gold is not backed by a bank or the government. It is possible to lose money.
- Anyone who promises to be able to “ensure” returns in the precious metals market is lying.
- Be wary of making purchases in reaction to commercials on the radio, television, or the Internet.
- Be wary of anyone selling gold or silver at a discount to the current price. Something is nearly always amiss when precious metals are selling for significantly less than spot prices per ounce.
- Sending money to overseas dealers or merchants, or anybody outside the reach of US law enforcement, should be avoided by US readers.
- Unsolicited phone calls or emails from precious metals dealers are known as “boiler room” pitches.
- Anyone who asserts that the supply of gold or silver coins is restricted should be avoided. “There are just five of these coins remaining in the inventory; you should purchase them right away.” There are several American Gold Eagles, Gold Buffalos, and Canadian Maple Leaf coins if you stick to metal investment. After you’ve completed your due diligence, you’ll be able to purchase the next day.
