Gold IRA Scams: A Complete Overview
To purchase physical gold and keep it in possession is a great way to invest in the metal and diversify your investment portfolio. And there’s arguably no better way to purchasing gold than through a gold IRA (individual retirement account). A precious metals IRA offers several benefits that owning gold outside the arrangement doesn’t provide. For example, you get special tax benefits akin to standard IRAs, ease of storage and management, etc.
A gold IRA custodian or company is instrumental in the gold IRA scheme of things. They help you set up the account, navigate the space, manage the various associated stakeholders, and more. Therefore, choosing the right company to overlook your retirement account is critical. And since there’s no dearth of gold IRA companies, you shouldn’t have trouble finding a suitable service provider. But unfortunately, there are several bad apples too. And if you don’t tread cautiously, you may fall prey to one of the many traps laid by these companies.
If you are a first-time gold IRA investor and did not bother to research, you’re likely to become a victim. Fret not. We are here to help you not lose money to counterfeit gold companies. This article discusses everything about and related to gold IRA scams. The following shall be the main topics of interest:
- A brief intro to gold IRA scams
- The various types of gold IRA scams
- The tactics the scammers employ and how to subvert them
- Answers to some common questions relating to the main topic and more
If you are interested in precious metal IRAs but are also wary of the space and the pitfalls, this guide is for you. Even if you are an existing investor, this article will only broaden your knowledge and make you even more aware. So, read on.
Table of Contents
What is a Gold IRA Scam?
As the name suggests, a gold IRA scam is a fraudulent scheme targeting people who want to invest in gold and other precious metals through an IRA. Scammers channel people’s desire for financial stability and make money out of it illegally and unethically by pitching them gold IRA products that promise unrealistically high returns, protection from the stock market or economic uncertainties, etc.
A fraudulent gold IRA scheme is a relatively common scam involving deceptive practices like high-pressure sales moves, dishonest marketing, fake endorsements, discreet fees, etc. They ultimately lead to financial setbacks for gullible investors. Learning their roots, signs, and everything else is imperative to prevent these scams.
The Advent of Gold IRA Scams
Anything that gains traction will have a nefarious parallel emerge to profit from the traction real businesses generate. That eventually brings disgrace to the real business, marring its credibility. Gold IRA scams are inflicting similar damage to legitimate gold IRA firms.
Gold IRA is relatively new compared to traditional IRAs. It has taken years of time and effort to popularize the retirement savings method among the masses and make it a viable investment or savings tool for retirement life, particularly among those skeptical about investing in physical gold. The last decade has been particularly significant for gold IRAs and all gold-related investments, particularly after the 2007-2008 subprime mortgage crisis.
But the precious metals investment scams are trying everything possible to break that momentum or even push the gold IRA industry into retrograde. There’s no shortage of bad actors littering the gold IRA space and trying to make quick money. They lure unsuspecting investors and steal their funds by selling the precious metal investments in their clients’ accounts. And that is just one way these scammers defraud the citizens.
Common Gold IRA Scammer Tactics
Fraudulent gold IRA schemes are relatively easy to locate, thanks to the relentless and aggressive marketing tactics the bad actors resort to. Unfortunately, unsuspecting investors mainly fall prey to such dishonest marketing easily. Here are some of the standard practices of gold IRA scammers:
Calling and Emailing Incessantly
The fraudsters employ high-pressure sales methods, promising big returns quickly. They bombard you with emails and calls for months. Well-respected gold dealers don’t do that. They only receive and respond to calls from prospective clients or contact you if there’s an issue with your account or a potential high-return investment opportunity is up for grabs.
Also, legitimate firms give you time to think and contemplate your investment decisions. They don’t make you feel bad if you choose not to invest further. Scam businesses, however, want you to spring into action immediately so that you don’t find the company is fake.
Laying the “Free Education” Trap
Some scammers persuade potential casualties by offering free workshops or educational seminars about precious metals investments. These events allow scammers to pitch their leveraged investment scams through impassioned sales tactics, pushing the attendees to make gold investments on the spot.
Those who don’t invest their money and exit the place with doubts are duly followed up until a deal is made. Also, existing investors are pressured to invest more money, citing explanations that bigger investments will net even better returns. This constant greed is to siphon as much money from naïve gold investors before the scam’s public.
Doling Misleading Information
Fraudulent gold IRA companies also mislead investors with incorrect or half-baked information about their track record, past performance, tie-ups with credible businesses, regulatory compliances, etc. Often, there’s limited or vague information provided. The company’s website is usually not comprehensive or transparent enough. Also, they paint a false image of quick wealth generation through gold investments by manipulating statistics, cherry-picking success stories, misrepresenting gold market or stock market trends, or artificially boosting their past successes to look more authentic.
Deliberate Hiding of Costs
Another thing these scammers do not fail to do is hide fees and costs and project how low-cost setting up and maintaining a gold IRA is overall. They don’t throw light on the risks attached to investing in gold. The costs they present, if they do, are much lower than what the competitors provide. Investors who believe the prices discover the truth later, likely having eroded a significant chunk of their investment returns by then.
Prescribing Unusual Modes of Payment
Credit cards, debit cards, and online payment gateways are the most common and secure ways to pay online, thanks to features like fraud monitoring and encryption. Popular cryptocurrencies, like Bitcoin, are also highly secure if used correctly. But using Bitcoin as a payment method on a suspicious website is risky. If the gold company offers the option to or wants you to pay via untraceable or uncommon payment modes such as gift cards or even cryptocurrencies, the company most likely offers phony gold IRAs.
Using Celebrities as Baits
Fake gold IRA schemes are also likely to be advertised heavily on the internet and television, particularly on conservative media. And if celebrities are selling you gold IRAs, grow more cautious. They likely have no gold IRA investments or know nothing about the products they’re selling. Most likely, they care about the money they get paid, not worried about the offering’s legitimacy. Scammers know celebrity endorsements attach more credibility to their products, which helps easily win over the trust of unsuspecting investors.
Instilling Fear About the Economy
Scammers blend excessive marketing with bad news or scaremongering, where they warn you about this dystopian world where inflation is sky high, paper currency has plummeted in value, impending wars have vandalized economies, and the only rescue option is gold. They project gold, silver, or other precious metal investments as risk-free and losses-free, which is not necessarily correct.
False Demonstration of Expertise
Fake gold companies use technical language or discuss too complex precious metals investment strategies and options to create the illusion of expertise. And they usually don’t bother to explain themselves even when you ask. The goal is to dissuade you from raising doubts and push you toward putting money on the table. Some scammers may discuss exaggerated or inaccurate trends in the market to convince potential investors that they possess inside information. Some even claim to have proprietary or secret software tools that could predict market movements, gold prices, etc.
How to Avoid Gold IRA Scams?
A trustable gold IRA business is an established firm with a proven track record and all the necessary affiliations and certifications to its name. Trustworthy gold IRA firms are mostly trust firms, banks, brokerage companies, credit unions, etc., that federal or state agencies have approved to function as self-directed IRA custodians or offer asset supervision services to those who’ve invested in gold IRA assets. Besides the above, ensure the following to avoid common gold IRA scams.
Cross-Check the Company’s Basic Credentials
If the company hasn’t been in the financial space before and is starting its journey fresh as an IRA custodian, learn more about the business. Gather information about its founding, services, etc., and verify the same. Ensure the company has all required and correct licenses, insurance, registrations, etc., in place. The company should have been registered with regulatory agencies such as the CFTC (Commodity Futures Trading Commission) and SEC (Securities and Exchange Commission).
Check for reviews about the business on credible review and rating websites such as BBB (Better Business Bureau) and BCA (Business Consumer Alliance). Look for complaints filed against the company. If there’s no mention of the firm anywhere on the internet or there are online records of aggrieved clients, do not proceed any further. Also, learn if the company has a physical presence or an office you can visit in person. Most scam operations don’t have an actual office. If they do, the place is usually discreet or undercover.
Study the Company’s Industry Standing
Generally, IRA gold investors select their precious metals dealers and depository through their custodians. Although investors can choose the other stakeholders independently, the need usually doesn’t arise as established custodians help their clients find the right service provider. If your custodian has no business relationships with gold dealers and depositories and wants you to choose the precious metals dealer and gold storage space, the company is either new or bogus.
Know What Setting Up and Maintaining a Gold IRA Costs
If you do your research and have more than a general idea about setting up and maintaining a gold IRA, you’re highly unlikely to be trapped by fraudulent gold or silver IRA companies. If you have no idea about market rates, research. Get to know the top gold IRA companies and the prevailing rates, and then make a decision. It’s okay if all that homework takes a few weeks. If required, talk to a financial expert. To start your research, learn more about companies like Goldco, Augusta Precious Metals, Birch Gold Group, etc.
Steer Clear of Companies Not Strictly Following IRS Rules
If you don’t know the major criteria gold IRA investors must meet to create and successfully maintain a precious metals IRA, here are they:
- The gold or other precious metals bought under the IRA must meet specific fineness standards.
- The precious metals must be stored in an IRS-approved storage space or depository.
- Besides meeting quality, the bullion coins and bars bought must be minted at an IRS-recognized mint. There is no room for rare coins in a gold IRA.
According to the IRS, gold coins, gold bars, or silver coins that are not pure enough are also out of bounds. Only a few coins, such as the 22-karat American Eagle gold coin, are permitted in a gold IRA despite not being pure enough. To learn more about the rules, click here.
A genuine gold IRA firm will not compromise on the above requisites. If the company you are associated with is okay with breaking the rules or accepts buying gold jewelry or other IRA-ineligible gold, steer clear. For instance, grow very cautious if the gold IRA company doesn’t restrict you from storing IRA gold in your closet, home safe, or safe deposit box or promises to deliver IRA gold directly to your house.
Enlist Expert Assistance
If you’re unsure about a self-directed IRA, hire a financial advisor and tread the space with them. The professional you choose must have expertise in gold IRA investments and retirement accounts so that they can lend a helping hand in setting up the IRA. The expert will vet your gold IRA company choices and ensure you create an account with the ideal precious metals IRA firm.
They’ll help you bypass fraudulent sales pitches and bogus gold companies without breaking a sweat, as they can immediately identify shady financial companies. You need not waste your time and effort sieving. One major red flag when corresponding with a gold firm or one easy way to identify a gold scam is the “guaranteed returns” promise. If a company claims or advertises guaranteed profits, it’s likely one of those “Ponzi schemes.”
What Happens When You Associate with a Dishonest Gold IRA Firm
First, there are no benefits. Let’s get that out of the way. The low rates promised are only on paper. The numbers don’t tally up. But if that isn’t bad enough, be prepared to get your money or gold swindled. Scammers could even visit your home and rob your cash if you're a senior investor. They pick and choose their victims that way.
Most of these companies don’t stick around too long. They usually disappear once you set up your account and deposit funds. The fake custodian will not use the money to buy gold, silver, or other precious metals. They instead take your money, shut down operations, and abscond, disrupting all communication lines so that you can’t trace them.
And if they purchase gold from your money, those are likely not pure or fake. But then, it’ll be hard to verify the authenticity of those counterfeit coins or bars as you’ll not have physical access to them. And if you desire to take a look, the bogus gold firm will make every possible excuse in the book to stop you from visiting the nonexistent depository. The entire arrangement will likely be only on paper, not in the real world. Not to mention, the documents shown will all be fake or computer-generated too.
Another horror experience synonymous with gold scams is “shaved coins.” These are basically the outcome of a dubious gold dealer removing a tiny portion or sliver of the coin before shipping them to a gold depository. The shaving is done carefully to mitigate detection, not changing the coin’s appearance much. The shaved coins are usually worthless or deemed less valuable than their original worth. You can prevent this by associating with a trustworthy precious metals dealer.
What If a Gold IRA Scam is Perpetrated?
If you conform to the above, you will not be scammed by a fraudulent gold IRA company. But if you are already a gold scam victim and stumbled upon this piece later, unfortunately, the damage is done. However, there are a few things you could do to salvage something.
First, report the fraud and take proper legal action. Don’t give up or dismiss the experience as a hard life lesson. Such inaction from affected people gives these scammers the impetus and impunity to trap more people. So, don’t sit idle. Report the matter to local law enforcement or relevant authorities like the CFTC and SEC.
Contact your bank or any financial institution you used to pay the scammer and check if you can stop or reverse a payment(s). Report the fraudulent activity to state consumer protection agencies, the Better Business Bureau, etc. Share your experience with family, colleagues, friends, and the internet so that people become wary and do not fall victim to such schemes. If you’re one of the victims, you may initiate a class action lawsuit.
If taking legal action, ensure all records relating to your correspondence (emails, transaction receipts, contract papers, etc.) with the bogus firm or its representatives are in place. Talk to a lawyer to discuss further action or recourses to recover your funds. The ability to recover all or a portion of the money depends on multiple aspects, especially the fraudulent firm’s assets and repaying capability. Needless to say, ensure no further communication with the fake business.
Read more: Best gold IRA companies
Although a gold IRA scam is linked to the wrongdoings of a gold IRA firm or an IRA custodian, the gold dealer or depository may also commit foul play. It’s usually the IRA company, the linchpin of the entire IRA arrangement. It, therefore, cannot be emphasized enough to pick your self-directed IRA company after much thought and consideration. Don’t jump on or give in to low prices or attractive advertising.
If a company calls you or knocks on the door to sell you a gold IRA, the business is either brand-new or bogus. An inexperienced firm may not cause you deliberate harm, but because it’s new, its approach to the process could be amateurish, which may put your investments off. On the other hand, dealing with a fake company is entirely hazardous to your financial and personal health.
Hopefully, this article lets you in on the things to watch out for when looking to create a gold IRA and the different ways in which fake and illegal firms could reach out for your cash. If you still have doubts, get talking with your financial advisor.
Why is the gold IRA space infested with fake companies?
The biggest reason gold IRA scams are so widespread or challenging to nip in the bud is the lack of regulation or the less stringent playbook in place than traditional financial markets. The lack of proper watchdogs means scammers can function with less supervision and tap into the “safe haven” gold investment sentiment of naïve investors. And these are a few of the many reasons fake gold companies can enter the gold IRA space and thrive.
Why is a rare coin not allowed in precious metals IRAs?
Rare coins, rare proof coins, collectible coins, etc., are usually not eligible for investment under a gold IRA account because they are hard to value or quantify. In other words, they do not line up with the concept of “retirement planning.” Unlike regular bullion coins, rare coins are deemed valuable for their precious metal content and their “scarce” status in the precious metals market. Other factors such as physical condition, historicity, aesthetic appeal, etc., also influence value. Fake coins or rare coin valuation scams are pretty widespread.
Moreover, selling collectible coins or rare bullion is difficult as they are niche products, and their liquidity depends on their demand, which can fluctuate a lot. Someone who doesn’t understand the collectible coin market will likely incur losses selling them instead of trading standard bullion coins, such as the Canadian Maple Leaf and American Eagle coins.
Note that the IRS could make exceptions for a government-minted rare coin usually pushed as collectibles in mint or proof sets. These sets could have higher premiums for their aesthetic qualities and limited production. But ultimately, your custodian takes the final call on whether to allow the particular coin.
Should you share personal data with a precious metal IRA company?
If you are confident of or trust the business, sharing financial account details, Social Security numbers and other specific data is okay. But if the company’s legitimacy is not certain or if it asks for personal info through email, refrain. Scammers could misuse your data for fraudulent activities, such as identity theft.