Regulators bust huge precious metals scheme
The U.S. Commodity Futures Trading Commission, along with 30 states, is shutting down companies that took in more than $185 million by selling gold and silver at inflated prices.
The states of Tennessee and Mississippi joined the U.S. Commodity Futures Trading Commission, CFTC, and 28 other states in shutting down companies that took in more than $185 million by selling people gold and silver at inflated prices.
At least 1,600 people in all 50 states were victimized, most of them elderly with little or no experience in making such investments. It's the largest joint enforcement action between the CFTC and state regulators in history.
The defendants are two Los Angeles men and their companies that operated under various names, including Metals.com. Neither man was licensed nor registered to sell precious metals and they attempted to evade regulatory action by changing company names.
Court documents allege they targeted people age 60 to 90 and reached out to them through television, radio, and social media ads as well as cold calls from boiler-room operations. They sold the victims mostly bullion coins at prices that were sometimes more than 300 percent higher than their true value using a variety of sales pitches. In some cases, they scared victims into believing their current investments were going to crash and in others they built trust by claiming to share a political or religious affinity.
In bringing the action, the CFTC'S Chairman said, “This case highlights just how geographically broad commodities fraud can be in our rapidlyevolving financial markets.” Tennessee's Commissioner of Commerce & Insurance said, “Many investors suffered substantial losses from retirement savings by relying on the false representations made by the defendants and their sales representatives.”
One woman complained to the BBB that a representative from one of the companies convinced her 80-year old mother that she would lose all her savings if she left the money in the bank and that gold and silver coins were a better, risk-free investment. The mother made the investment and when the complainant tried to liquidate it, she was quoted a price that would result in a $50,000 loss even though the price of gold and silver had gone up.
An 82-year old woman complained that a company representative scared her with claims that the stock market and mutual funds were the worst place to be. She moved her entire life savings into gold and silver at prices that resulted in a loss of 71 percent. A 72-year old disabled lady said, “I was overcharged for the coins so much the coins would never have a value to meet what I was charged for them.”
There are at least 24 victims in Tennessee. In 2017, a former Tennessee legislator and three family members were convicted of running a similar scheme that took in more than $87 million.
The BBB offers these tips to avoid becoming the victim of a precious metals investment scam:
Check out the seller or dealer with the BBB, regulatory agencies, and online to learn about other people's experiences with the company. Precious metals transactions are regulated by the CFTC or the National Futures Association and sellers need to be licensed or registered.
Walk away from high pressure sales pitches that attempt to create a sense of urgency and/or minimize the risk.
If you don't have experience investing in precious metals, consult with a qualified financial advisor. Be sure the product fits your financial needs.