Rare Coin Fraud

Investing is a great way to help increase your net worth. While many people stick to stocks, bonds, and other traditional type investments, there are many others who look for other ways to spread out their money. Gold, gold coins, rare coins, and precious gems are just one way to do so. Unlike the stock market, however, these investments are not heavily regulated and the fraud and deception can run deep. If you have been the victim of rare coin fraud, you may be able to recover your losses by filing a lawsuit. Schedule your free case review with an attorney from Arentz Law Group P.C. today by calling 1-800-305-6000, or by filling out the contact form on this page.

Why Invest in Rare Coins?

Traditional investments, such as investing in the stock market, are often limited in what they can do. When the market takes a huge downturn, like what was seen in 2008 and 2009, people look for alternative methods to increase their net worth.

Since gold, rare coins, precious gems, and other similar items often hold their value better than other investments, millions of dollars were poured into them. As a result, the value of gold skyrocketed over a period of just a few years. This meant that those who were selling their goods could get a lot of money for them. It also meant that there were a large number of fraudsters taking advantage of people.

Why is there Rare Coin Fraud?

When stocks take a nosedive, as they did in 2008 and 2009, people start to look for other places to invest their money. They want something safer, and preferably something that is increasing in value while other investments are declining. Rare coins, as well as gold coins, silver coins, and precious gems, are a great way to invest your money without taking on a lot of risk.

Unlike the stock market, however, the rare coin market has little oversight. This means that there is no equivalent to the Securities and Exchange Commission (SEC) watching over the coin market. As such, coin fraud is easier to get away with than securities fraud. Fortunately it is relatively easy to avoid if you do your homework in advance.

What is Rare Coin Fraud?

Rare coin fraud can take on a number of different aspects, but the bottom line is that you are defrauded when the seller makes claims about the coin that are untrue, and you end up paying more than what the coin is actually worth. How does this look? Here are a few of the primary ways that is done; nearly all use high pressure sales tactics.

Over-Appraisal

Coins are graded based on their condition. While most coins have gone through a professional grader, there are some shops that do their own grading. They claim that a coin is in “Mint” or “Near Mint” condition, when actually it is just in “Good” condition. By claiming it is a grade or two above where it actually is the dealer charges far more for the coin than it is actually worth.

Salomon Index

The Salomon Index is often quoted by coin dealers. It is an annual index compiled by the bank Salomon Brothers, and shows appreciation of coins. However, the index is based on just 20 extremely rare coins that will appreciate much faster than most other coins. Dealers that are trying to take advantage of customers will claim the coin will appreciate faster than it really will.

Lying About Material

Some brazen coin dealers will flat out lie about what the coin is made out of. Suppose you go in to buy gold bullion coins and you see some that are relatively cheap (suppose gold is worth $1,000 per ounce and these 1 ounce coins are selling for $950). You may think you are getting a great deal, but somewhere down the road you try to sell them only to find out they are not pure gold.

How Rare Coin Fraud Works

There are many different ways that someone can take advantage of another, but it often happens in two primary ways: defrauding the buyer or defrauding the seller.

If you are selling your rare coin collection, you might take it into a dealer. That dealer would evaluate the collection and give you an offer on purchasing it. A dealer that has your best interest in mind will offer market value minus a certain percentage. A dealer that wants to defraud you will undercut the price and give you only a fraction of what your rare coins are worth.

If you are buying rare coins, the tables are turned. You approach a dealer and they use a variety of high pressure tactics and false claims to sell you rare coins that are worth far less than they are claiming. You end up buying coins for double or triple their value, and when you turn around to sell them, you take a big loss.

Signs of Rare Coin Fraud

The best way to prevent being the victim of fraud is to know about the scams that exist. By knowing what to look for, you can avoid being taken advantage of. Here are some of the more common rare coin frauds that exist:

Guarantees

As with all investments, there are no guarantees that your investment will appreciate in value. Even if the coin is rare, if more are discovered and the market becomes flooded with similar items, the value with decrease. If a dealer offers a guarantee (other than a buy-back guarantee if you’re not 100% satisfied) then walk away.

High Pressure

Any time someone is trying to sell you something, they will want you to make a decision right away. There is a fine line between a good salesman and a high pressure one. If you feel pressured, remember that you are in control and you can take your business elsewhere.

Buy back Refusal

A dealer that is legitimate will have a clause in their contract that contains a return policy. Sometimes it is for any reason, other times it is if the coin appraises by a third party for much less than you bought it for. If you are promised a buy back, and then the dealer refuses, you may be a victim of fraud.

No Straight Answers

If you call to complain about your purchase, and you are met with aggression, the run-around, or simply cannot get straight answers, you are likely dealing with an unscrupulous dealer.

Others

There are many other ways that you may have been defrauded. Unauthorized charges on your credit card, receiving coins you didn’t order, receiving coins in a condition other than as promised, or if you are all around uneasy about the transaction, are all signs of rare coin fraud.

Rare Coin Fraud: False Grading Claims

The value of a coin is determined by two factors: how easy is it to acquire and what condition is it in? The first is relatively easy to determine, a rare coin will be harder to find than one that is more common. The second is not quite so objective.

Coins are graded on the Sheldon Coin Grading Scale. This scale runs from 1 all the way to 70. A coin that grades BS-1 means it is in Basal State 1, essentially it is very warn, corroded, damaged, or otherwise in poor condition. A coin that grades MS-70 means that it is in Mint State 70; the only way to get to the MS scale is to have an uncirculated coin (all MS coins are 60+). Essentially the higher the number, the more the coin will be worth.

One of the most common rare coin scams is when an unscrupulous coin dealer tries to claim that a coin has a higher grade than it really does. This dealer will have a coin that would likely grade a MS-63, rather than an MS-70. However, he may try to take advantage of a customer and put it in a case that says it is MS-70, thus marking the price up far higher than it really is (potentially thousands of dollars). The victim buys the coin believing he or she is making a good investment, but when it comes time to sell the coin they find they must take a huge loss on their investment.

To combat rare coin fraud there are a few methods you can take. First, make sure the coin has been graded by a professional. Whenever the coin is professionally graded it will be sealed inside the casing without the ability to get it out of there. Keep in mind, however, that these can be counterfeited. Instead, a better option would be to have a contract set up that you may return the coin in the event that a third party appraiser gives it a different grade. If the dealer refuses to honor that contract, you may need to enlist the help of an attorney from Arentz Law.

Ways to Prevent Investment Fraud

Unfortunately even the most wary can end up becoming a victim. But if you take the time to do your homework, and to watch out for these red flags, you can greatly reduce your risk.

Check Licenses

Anyone selling stocks and bonds has to be licensed with FINRA. You can easily check to see if they have the adequate licensing, as well as if they have had any complaints or disciplinary action against them, by using the FINRA Broker Check website.

Research Investments

Most people will be well served using investments that are well known. This means that stock in big companies (or at least companies that are on the New York Stock Exchange or NASDAQ), mutual funds, and other investments. If you are pitched an investment you don’t understand or know about, take time to research it first.

Avoid Pressure

Sales is a hard job. Sometimes even those with your best interest can become a little forceful after dealing with people saying “no” all day long. A legitimate investment is rarely one with a time limit so if you feel pressured tell the sales person you will think about it.

Monitor Your Investments

You should never hand over full control to a financial planner. Instead, you should be able to monitor your investments at any time without going through him or her. For instance, your broker may be the one to set up your account with mutual funds, but at any given time you should be able to call the mutual fund company and verify your holdings.

Recourse if You are a Victim of Investment Fraud

If you have been the victim, or you feel you have been the victim, you should take action immediately. Your financial loss may not have been your fault.

Written Complaint

Your first course of action is to write a written complaint to the broker with whom you are working. Make copies and send one copy to the broker and one to the managing director for the firm. Often this is all that is needed.

Contact the SEC

The SEC is set up to monitor and oversee investments. They have a lot of power and help you get out of tough situations. If the fraud runs deep, as in the entire firm is scamming people, the written complaint won’t work. Instead, you have to go to the regulators.

Hire an Attorney

Sometimes the only way to get your money back is to hire an attorney from Arentz Law Group. With legal help you can recover part or all of your financial losses.

Contact Arentz Law about Your Investment Fraud

If you have been the victim of investment fraud, you should not just ignore the problem. Even if your loss was just a couple hundred dollars, it is important to expose the fraudsters and stop them from scamming others out of even more money. If you need help recovering your losses, schedule your free consultation with an attorney from Arentz Law Group P.C. today by calling 1-800-305-6000, or by filling out the contact form on this page.

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