(Photo of Ft. Knox)

What is the lure of gold? For thousands of years people have used gold and silver as a measure of wealth. It’s durable and is frequently held as a hedge against inflation. Americans love gold and unfortunately, scammers love it too. Two precious metal dealers have been charged by the CFTC and thirty states with defrauding elderly investors out of $185 million by getting them to invest in overpriced gold and silver.

TMTE Inc. (doing business as Metals.com), Barrick Capital, Lucas Asher and Simon Batashvili were all named in the complaints. Regulators say that since 2017 the defendants have ripped off over 1,600 people, most of them elderly investors.

According to the complaint, “Defendants’ scam is particularly egregious because they preyed on persons between 60 and 90 years of age and swindled them out of their retirement funds by charging them fraudulent prices to purchase precious metals bullion.”

The CFTC says,

“Through their fraudulent solicitation, the defendants deceived customers into purchasing precious metals bullion at grossly inflated prices that bore no relationship to the prevailing market price. The overcharges averaged from 100 percent to more than 300 percent over the prevailing market price. In the end, nearly every customer lost the vast majority of their funds deposited with the defendants.

“As the complaint alleges, to perpetuate their fraud, when questioned by customers about the value of the precious metals bullion they purchased, the defendants falsely claimed that the precious metals bullion were rare and carried a premium far above the base melt value. In fact, the precious metals bullion were significantly less valuable than the defendants claimed.”

InvestmentNews quotes Metals.com as denying the charges. “We look forward to defending our right to fully ship physical retail products in under 28 days in both the physical industrial metals and precious metals markets.”

A jury will ultimately determine whether or not the companies and their principals are guilty. Looking behind the headlines, there are many red flags in this case that should be discussed.

Beware of Affinity Frauds

The complaint suggests that the scam targeted Christians and people with conservative beliefs. These so-called affinity scams are often effective because they prey on a victim’s membership in a particular group. The fraudsters involved in affinity scams often are – or pretend to be – members of the group. Sometimes they are successful in  enlisting unsuspecting leaders from the group to spread the word about the scheme, further adding to its legitimacy.

Simply because a company advertises in a religious publication or claims to adhere to a particular philosophy doesn’t make their claims true. Affinity scams often work, however, because victims let their guard down if they believe the person soliciting them is the member of the same religion, group or organization.

We believe the scam was particularly effective because most of the people solicited were elderly. The promoters allegedly claimed that their retirement was at risk and that immediate action was necessary to protect their nest egg. Regulators say that many folks cashed in legitimate retirement assets to invest in these volatile and over priced metals.

Brokerage Firms Were Unlicensed

What most frustrates us is that this scam was easily preventable. According to regulators, none of these companies or principals were licensed to sell commodities. Buy a box of cookies from a girl scout and you probably don’t check to see if they are legit. The worst that can happen is that you lose $10 or so.

What amazes us is how many people will cash in their life savings and send it to someone they met on the telephone. It is so easy and fast to see if a broker is legit and licensed. That doesn’t prevent every fraud but some simple due diligence could have prevented tens of millions of losses to folks who can least afford it.

Don’t know how to check on a broker? If they are selling commodities like gold or silver, start with the Commodity Futures Trading Commission. Being asked to buy securities? Start with FINRA’s Broker Check system. A few mouse clicks will tell you everything you need to know.

Still think its too difficult or confusing? Ask a family member who is good with Internet or a trusted banker for help. A few seconds can keep you from years of poverty.

If someone tells you they don’t have to be licensed? Run.

Beware Gold Investments

Obviously not every precious metal investment is a scam. There have been enough gold scams in recent years, however, that both the CFTC and state securities regulators have published their own precious metals advisories. Do some research before you invest.

What Is In a Name? Everything

If you do invest, make sure the firm getting your hard earned money is legitimate.

Prosecutors say the company changed names frequently and often used names very similar to legitimate companies. For Example, Barrick Capital sounds similar to Barrick Gold, a large well known Canadian gold miner.

When one name would become too toxic because of negative reviews, the promoters would change the name. For a while, regulators even say the company was using the name USA Mint. Obviously, that could cause confusion with the U.S. Mint, the latter being a government agency.

What Will Happen to Metals.com / Barrick Capital Investors in this Case?

The CFTC and states are working jointly to get back investors’ money. Sadly, in our experience much if not most of the money is gone by the time regulators close in. Insurance is usually not available for fraud claims either.

The investment fraud recovery lawyers at Mahany Law accept cases with losses of $100,000 or more but only if there is a legitimate brokerage firm or third party involved. We occasionally consider class action cases if we can find an outside third party such a bank that facilitated the fraud.

To learn more, visit our stockbroker fraud recovery and precious metals fraud information pages. Ready to see if you have a case? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. We accept cases anywhere in the United States.

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