Today’s entry serves as a warning to investors. Let’s face it – we all want to find the best way to make the most money as fast as we can with minimal effort. It’s not that this is a bad goal. But when we try too hard to accomplish it in its entirety, we often make very poor decisions. The result is that we find the worst way to lose the most money as fast as possible, with minimal effort.
If you’re like me at all, you’re bombarded by investment services, account managers, widows in Lithuania and any other number of schemes that promise to make you wealthy if you simply follow their advice – for a fee of course. And, have you ever noticed; there’s always an “only” in front of the price, no matter how reasonable or outrageous it is.
A lot of times these are legitimate though, so we want to be careful and give credit where credit is due. The most dangerous ones are those that seem to represent tried and proven means of investing, yet have some sort of Ponzi scheme or other shenanigans going on behind closed doors, where you wouldn’t suspect unless you performed the necessary research.
A recent example is the fast one Bank of America pulled on their shareholders, when they failed to release numbers that would have shown the real value of Merrill Lynch. Shareholders were told what a great deal the acquisition would be, with very little information of the massive exposure they’d face in such a move. The result was massive losses for the company and, therefore, for the shareholders as well. This is in addition to the massive bailout that you and I will be paying for until we’re six feet under.
But a South Carolina company hits us a little closer to home, in some ways. We’ve seen the ETFs that supposedly hold gold and silver, offering us opportunity to trade the metals in the open markets. This is different.
According to the commodity futures Trading Commission, Atlantic Bullion & Coin, Inc, of Easley, South Carolina, has been fraudulently selling shares in precious metals, without actually purchasing and holding the corresponding metals on behalf of their customers.
In a complaint filed by South Carolina’s Attorney General, Alan Wilson, the dealer is accused of “defrauding clients and running a multi-million dollar ponzi scheme.”
In the complaint, the Attorney General alleges that Ronnie Gene Wilson operated an illegal ponzi scheme in which earlier investors were paid from the investment monies placed by newer investors. The complaint also alleges that investors were issued statements showing the purchase of silver for them, when no silver was actually purchased.
Attorney General Alan Wilson also alleges that defendant Ronnie Wilson made false or misleading statements to investigators from the Securities Division, including statements regarding the quantity of silver that the defendants actually took possession of and held for clients.
Defendants Ronnie Wilson and Atlantic Bullion and Coin took in approximately 70 million dollars from numerous investors in 25 states in the last three years, according to the complaint.
The scheme included falsified documents, claiming that the metals existed in storage. While we have to keep in mind that the defendants may be innocent, this brings up a very important point for investors. It’s far too easy to simply send our hard-earned money in and think we’re covered. Then, when it’s time to take delivery or cash out, there’s nothing to back it up.
This is precisely why we focus on physical delivery or holding in an IRA account, where physical presence is assured. There are good companies that offer vaults for your holdings, if you prefer that route. But be careful to make sure physical metals actually exist. If you can, visit the vault. But, unless it’s set up as an IRA holding, you may be missing out on substantial tax advantages.
For your prosperity,
J. Keith Johnson
The Gold Informant