History teaches us that there will always be people who seek to exploit other people for their own gain.
It's especially true in the investment industry, where people are often seeking an easy means to make a quick profit.
Finding reputable gold IRA companies and gold bullion dealers is the first step in making sure you're not dealing with a scammer.
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Gold has become increasingly popular in recent years, so people who don't understand certain concepts related to investing in gold may be vulnerable to scams.
It's important to know which types of gold frauds exist so that you don't fall victim to any of them.
Furthermore, having the right investment apps to track the market and keep an eye out for potential scams can also be helpful when investing.
Here, we’ll discuss some of the most common types of gold scams and provide you with advice on avoiding them when buying precious metals.
Before we start, if you're interested in finding out everything there is to know about the lies that gold IRA dealers tell (and how to avoid them) then here's a free report that you may want to take a look at.
Former NFL quarterback Joe Montana has made millions using his knowledge of investing to invest in precious metals.
Well-Known Gold Scams
A number of Chinese banks and financial institutions were duped by a huge counterfeiting scam centered in Wuhan.
Once one of the largest companies in the world, Kingold deposited billions of dollars worth of precious metals as collateral with 14 different financial institutions and borrowed $2.7 billion from them to invest in China’s real estate market.
The problem: About $83 million worth of that bullion was supposedly fake.
When one of their borrowers – Dongguan Trust Company – went bankrupt, they called in their loans.
Kingold didn't have enough cash to pay back its loans, so the banks decided to take their property instead.
After examination, the banks found that many of the gold deposits were made from gilded bronze.
There was no direct harm done to any particular investor.
However, the scale of the scam – 83 tons of metal – reveals just how much money and resources are spent on scams.
If 14 established banks were so easily fooled by fake gold certificates, what hope does an individual retail gold buyer or seller have?
There are several things you can do to protect your privacy online.
You shouldn't be lazy or gullible, but you can be both at the same
It's usually recommended that investors have some exposure to gold and/or precious metals in their retirement plans.
Physical gold, silver, platinum, and palladium represent a way to diversify your portfolio against stock market risks, inflation, currency risks, and other hazards.
To protect yourself from gold scam artists, precious metal fraudsters, and fake ring thieves, you need to know their methods and tactics.
China is home to many of the world's largest and most sophisticated counterfeiting operations.
Non-Delivery Scams/Ponzi Schemes
A Ponzi scam usually involves taking people’s money and not using it for its intended purpose.
One example of a company taking advantage of an unexpected opportunity was when Northwest Territorial Mints' owners received millions of orders for their gold bullions.
They lied to their customers about when they would ship the products while using the money to grow the business and live a lavish lifestyle.
They used the money they received from new orders to repay their oldest customers.
According to the U.S. Attorney for the Northern District of Illinois, Northwestern Mint defrauded thousands of its customers, costing them millions of dollars, and resulted in 14 felony convictions.
A similar example would be Hannes Tulving, who ran a company called The Tulving Company, selling gold and silver coins online.
Tulving’s scheme began when he failed to provide his clients with the actual goods they had paid for.
Instead, Tulving spent his money funding his lifestyle and keeping the fraud going until he was caught.
When people complained about missing shipments, Tulving would offer different excuses and give refunds only if he was forced into doing so by law.
He had stolen over $15 million by the time the Justice Department became aware of his crimes.
Lessons Learned
Make noise early.
Yes, there are some occasional delivery issues, even for legitimate distributors.
If you're feeling like you're getting taken advantage of, its best to ask for a full and immediate return. Even if you have to threaten to sue.
‘Rare Coin' Valuation Scams
Rare, proof, uncirculated, or collector coins are often sold by unscrupulous coin dealers at very high markups over spot prices.
At times, the gold merchant may deliver a similar coin of lower quality than the one you ordered.
Ordinary consumers cannot tell the difference between good and bad products.
A woman who was 70 years old at the time received an offer from a coin dealer to buy her entire stock of Swiss golden eagles for just $10,000. She accepted the deal.
He told her the price of the coin was now $10,000, but she didn't want to pay that much for a piece of metal. So she asked him if he would take $8,500 instead.
She smelled a scam, refused, and asked for her money back.
She didn't return her change until she filed a lawsuit against the store.
At last, the dealer sent her another set of different-colored balls.
She was shocked when she found out that the new coin collection was worth only $1,000.
She was never able to get back any of her lost coins or money.
Bullions: coins and bars are explicitly made for their precious metal content, and they sell at very near to their spot prices.
Rare coins, proof sets, and collector’s items are not for non-experts.
Bullion coins are usually bought at the market price for gold content, so they're not vulnerable to valuation scams.
Gold IRA Scams
If you're interested in buying some physical bullion for an investment account, you might want to consider purchasing some physical bullion.
If that’s the case, then it would be a good idea to deal directly with an IRA company that specializes in IRAs and other retirement account services.
There are several reasons why this happens.
First, Congress has limited the type of gold and precious metals allowed in IRAs. They've also placed restrictions on how many gold and precious metals you can put into your IRA. You cannot purchase any other type of precious metal besides gold, silver, platinum, and palladium for your IRA investments. You need to buy gold, silver, and/or palladium coins, bars, or round. They must be 99.5%, 99.9%, or 99.95 percent pure, respectively. To qualify for precious metal IRAs, investments must be made through a nationally recognized exchange (NYSE, COMEX, etc.), approved refinery (LBMA), approved mint (NYMEX, COMEX) or manufacturer (TOCOM). Proof coins must be complete, original, and in perfect condition. They must also come with a certificate of authenticity. Bullion coins must be made to exactly specified weights. Proof (bullion) coins need to be free from any signs of wear or tear and in perfect mint state.
Some unscrupulous or poorly educated precious metal dealers and sellers may try to sell you numismatic collector coin products for your IRA. However, these items are not allowed in an IRA.
These salespeople are not looking for long-term relationships. They're only interested in making a quick buck.
If you want to keep some kind of coin collection inside an IRA, then you need to be aware of the rules.
If that's the case, then the IRS might disallow the entire IRA and force the taxpayer to take a taxable withdrawal of the full amount.
You could be liable for substantial taxes and penalties if you don't take advantage of this offer.
The Home Storage Gold scam is an investment fraud scheme that promises investors high returns
You must keep physical gold, silver, palladium, or platinum inside an IRA or other retirement plan at a government-regulated safe deposit box or depository.
You cannot take physical control of your gold IRA assets; they must be held by an authorized custodian.
They're not safe anywhere.
Some precious metal investors have been misled by unscrupulous brokers who claim they offer safe ways to store their gold coins and bars.
You can store your precious metals in a safe deposit box or bank account instead of having them stored at a third-party depository.
It's now crystal clear: Trying to keep gold and silver IRA assets at your house is illegal.
If you want to keep your precious metals and other valuables safe from thieves, you can keep them at home and store them in your own personal safety deposit box.
If you're holding physical gold or other precious metal in any type of retirement account, you cannot touch it.
You don't want to keep holding onto your precious metal IRA assets for too long because they could lose value if you hold them too long. So instead, you have your precious metal IRA assets sent to a third-party depositary, where they're stored until you decide to sell them or distribute them.
Affiliate Scams
Criminals exploit affiliations to build their credibility and then they exploit the marks.
Scammers often take advantage of other people within a community.
People tend to be most trusting when they're similar to their peers. Therefore, people are particularly susceptible to scams if they're similar to their targets.
For instance, Larry Bates, together his wife and two kids, heavily promoted his precious metal business by using Christian and Jewish TV and radio stations.
He held conferences and sold his services to audiences across the United States, promoting the idea that there was going to be an impending economic crash, and he needed people to buy gold coins so they would be safe from the coming crisis.
He was a good salesperson. Between 2007 and 2013, he sold his clients more than $87 million worth of goods.
He wasn't a good steward of the company's funds; according to the Justice Department, they were used for his personal expenses and investments.
He spent $4 million building an evangelical media company called the International Radio Network to further spread his family's scams, and he bought a 10,000-square-foot mansion on a 300-acre property in Tennessee.
By 2009, the firm had already defrauded its clients out of millions of dollars worth of unfulfilled metal purchases.
The family was eventually sent to federal prison for a total of 627 years.
Affiliate schemes aren't just for religious groups; they're also used by criminals who want to exploit people's faith in fellow minorities.
Counterfeiting
There are several large scale, sophisticated counterfeiting operations operating with the help of corrupt government officials in both China and South Africa.
However, counterfeiting isn't limited to any particular region. Counterfeiters operate almost anywhere in the globe.
A 34-year-old man from Morristown, New Jersey, was convicted of importing and exporting fake silver Morgan dollar coins.
He also admitted to buying fake golden bars from another buyer for $11K in hard currency.
The twist: Kirshner was also convicted of pretending to be an ATF agent when selling guns to potential buyers. He wore a fake ATF agent’s uniform to trick people into thinking they were dealing with legitimate agents.
Other well-funded criminals are actually counterfeiting their own goods by faking the markings. They're not really selling anything at all.
It enables criminals to bypass sanctions and launder huge sums of cash.
China, in particular, is the source of many counterfeits of precious metals. Criminal gangs have been making fake coins from lead, tungsten, or copper and applying a thin layer of real metal for color.
Many of these coins are sold online rather than in stores.
If you're an experienced buyer, you might be able to tell if a fake coin is real just by looking at it.
Even if that doesn't work, savvy shoppers regularly check the weights and sizes of items they're buying using scales and measuring devices.
However, criminals who use counterfeit coins to defraud people online don't have that problem. It's difficult to spot counterfeits online.
If you get the coins for completing tasks, then the photos from the sites might not be the coins you receive.
Many online buyers purchase counterfeit coins from sellers who claim their items are authentic, but these fakes often turn out to be worthless.
They learn it's fake from their local dealer just when they need the cash. Buy only from established and reputable dealers. Look for customer feedback from reputable websites.If you're going to invest in a scale and caliper, get one now so you won't waste time trying to figure out if something is fake. Be very suspicious of anything selling at a lower price than its current market value. Make sure the company is properly licensed by the National Futures Association if they're storing your precious metals for you. You need to know exactly how heavy each individual penny is before you buy them. If you don't know, then get a scale and measure everything out yourself. One ounce (28.3 g) of 24-karat gold coinage should weigh exactly 31.1 g. A coin weighing 22kg (48lb) should be worth $1,000.
Gold Scam Warning Signs
Be wary of anyone who tries to tell you that gold investing isn't risky. It is. The price of gold fluctuates. There is no bank insurance or government backing in gold investing. You could lose your entire investment.
Based on an article from https://www.adamenfroy.com/gold-ira-scams
