Gold IRA Scams to avoid in 20239 min read

Disclaimer: We’re reader-supported. When you buy through links on our site, we may earn an affiliate commission.

Most people you encounter in the gold investments business are trying to do the right thing. Outright scams are rare. But scams related to gold investments happen often enough that you should be aware of the common types of scams you may encounter in your journey into investing in gold and precious metals. 

As a self directed IRA or precious metals IRA investor, the scams you may run into typically fall into the following major categories: 

• Gold IRA scams and counterfeiters, targeting gold buyers in general;
• Fake custodian scams, targeting the gold IRA market in particular; and
• Gold IRA home storage scams.

Gold Scams and Counterfeiters

Counterfeiters have developed several techniques for producing fake coins and/or gold and precious metals that can be difficult for amateurs and casual investors to detect. According to the Anti-Counterfeit Education Foundation, there are at least 300 websites trying to sell counterfeit gold coins and bars to unwary investors.

Here are just some of the most common techniques gold and silver counterfeiters use: 

• Gold plating. This is the simplest and most common technique used to make counterfeit gold. A thin layer of real gold is plated onto a less expensive metal, such as copper or silver. The counterfeit gold may look authentic at first glance, but the plating can wear off over time, revealing the underlying metal. 
• Drilling or corin. Counterfeiters sometimes drill a hole in a legitimate gold or silver bar, and collect the shavings. They’ll fill the hole with lead or tungsten, and then apply a convincing looking plating to cover up the drill marks. 
• Tungsten cores. This technique involves creating a counterfeit gold bar or coin with a tungsten core that is plated with a thin layer of real gold and/or precious metals. The weight and size of the bar or coin is the same as a genuine one, making it difficult to detect the counterfeit. However, an X-ray fluorescence scan can reveal the presence of tungsten.
  
• Alloys. Some counterfeiters use a mixture of metals to create an alloy that looks similar to gold. These alloys can be difficult to detect with the naked eye or basic tests, but can be identified with more advanced testing equipment.
• Gold salts. These are chemical compounds that can be used to create a fake gold solution. This solution can be applied to objects or jewelry to give them the appearance of gold. However, the solution can wear off over time and may be harmful if ingested.

Often, these companies will advertise an unrealistically low “introductory offer” selling gold bullion coins and silver coins for 50% or 75% under spot price and waiving a cost here and there. But if they send you the coins at all, you’ll probably receive a counterfeit.

Much of the counterfeiting scams are headquartered in China or Africa. And these counterfeiting rings are very difficult or impossible for law enforcement authorities to track down.

The Valuation Scam

In this scam, the precious metals dealer sells you a premium product, such as a high-quality proof coin. But actually delivers a lower-valued product.

In the context of gold IRAs, absent a rare exception (i.e., you’ve managed to jump through the hoops to become a registered custodian), you should not even see your physical gold coins and bars at any point. Instead, the law generally prohibits you from taking personal possession of precious metals in your gold IRAs. So those that fall for this scam typically will not learn that they’ve been bamboozled until years later (when they attempt to make a distribution).

You can minimize the risk of a valuation scam by buying only bullion products and avoiding proofs. Your investment should be based on the intrinsic value of the precious metals contents of the gold and silver coins, bars, bullion, or rounds in your IRA themselves, and not on any speculation based on the rarity, beauty, collector’s value, or other intangible aspects of the product.

Upselling. Another more common version of this category of scam can even happen with individual sales representatives at otherwise reputable Gold IRA vendors: the salesman may try to convince you to pay extra to buy proofs or numismatics, which are coins designed more for the collectors’ and hobbyist market than for IRA investors. 

The sales rep may be trying to drive a slightly higher commission or unload some slow-moving inventory by pushing you to buy proofs and collectibles. But In fact, numismatics are not even eligible for inclusion in IRA accounts.

If you inadvertently buy prohibited investments (such as a collectible coin that’s not authorized for inclusion in a retirement account), you could face significant taxes, penalties, and even the potential disqualification of your entire IRA account. This would then force you to take an immediate distribution of the entire investments’ balance, and pay income taxes and any applicable early withdrawal penalties.

Related: Birch Gold Group Review – Is the Gold IRA Company Reputable?

Fake Custodian Scams

Fake custodian scams target people who are interested in investing their retirement funds in precious metals. The scam typically involves a company or individual who claims to be a gold IRA custodian, offering to help you set up self directed IRAs and investing your retirement savings in gold bullion.

The scammer may use high-pressure sales tactics to convince you to transfer your retirement accounts’ funds to precious metals dealers or storage facilities, promising high returns and guaranteed profits.

But once you hand over your money, the scammer may disappear outright. Or provide fake or overpriced gold products. Or attempt to build trust by stringing you along over time, waiving a cost here and there in an effort to try to get you to invest more and more money over time, while they use your money to pay off earlier investors in a Ponzi scheme.

Eventually, the Ponzi scheme collapses, and later investors are left holding the bag.

Related: How to Diversify Your Savings with Gold & Silver (Tax-Free)

Anatomy of a Fake IRA Custodian Scam:  Ephren Taylor II and the City Capital Corporation

Ephren Taylor II was a young and charismatic son of a minister who billed himself as the “youngest black CEO of a publicly traded company.” Between 2007 and 2010, he was a motivational speaker and roadshow presenter at black churches across the Southern United States.

He preached “economic empowerment” to churchgoers, and disparaged conventional investments like mutual funds, stocks, and bonds. Instead, he urged churchgoers to fire their brokers, and invest their life’s savings with him in inner city small businesses, which he proclaimed to be safer than stocks, promising returns as high as 2,400% (see pg. 11). 

Instead, Taylor took his clients’ money and spent it on living a lavish lifestyle, luxury cars, opulent vacations, and funding his wife’s career as an R&B singer – including producing this video of her single “Billionaire.” 

In 2012, Taylor was charged with securities fraud by the Securities and Exchange Commission (SEC) for allegedly operating a Ponzi scheme through the City Capital Corporation. In 2014, he pleaded guilty to federal charges of wire fraud, and was sentenced to 19 years and 7 months in prison and ordered to pay more than $15 million in restitution to his victims.

Anatomy of a Fake IRA Custodian Scheme II: Bernie Madoff

Similarly, Bernie Madoff exploited trusting contacts in the Jewish community in and around South Florida and New York, including a number of self-directed IRA investors. Madoff convinced his clients to transfer their retirement investments to his own brokerage firm, which was, in fact, an IRS-approved non-bank custodian authorized to conduct IRA transactions.

But Madoff didn’t invest their money as promised. Instead, he used the money to support his lavish lifestyle and keep the Ponzi scheme going. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, and admitted that his wealth management “practice” was, in fact, the biggest illegal Ponzi scheme in history.

Ultimately, federal authorities  estimated that Madoff’s scheme resulted in actual losses to investors of $18 billion. However, about  $14.2 billion has been recovered and returned to investors thus far.

Madoff died in prison in 2021. 

In both cases, these con men ran an affiliation scam, exploiting the trust other members of minority groups placed in them and causing them to let down their guard

And in both cases, these con men kept the fraud going for years before the math caught up to them. 

Related: Request Your Free Gold & Silver Guide from Augusta Precious Metals

Home Storage IRA Scams

In the gold IRA home storage scam, a salesperson may approach you about buying gold and other precious metals and trying to convince you that you can store your gold bullion at home in your own personal safe, rather than use an approved vault or depositary service.

The scammer may try to convince you to set up an LLC to hold within your IRA, and have the LLC own the gold.

They may try to sell more than the gold, charging a fee to set up your LLC. They may also try to sell you a home safe and alarm system. 

There’s nothing wrong with owning some gold or other precious metals directly and keeping it at home. Generations of investors and collectors have done (and will continue to do) exactly that. However, the self-directed IRA rules specifically prohibit you from taking physical custody of the assets (e.g., precious metals) that are supposed to be included in your IRA.

Put another way, absent very narrow circumstances (i.e., you’ve become a registered custodian), you cannot store your IRA assets in your own personal safe unless you want to liquidate the IRA (and pay related penalties). Instead, you must use a secure third-party vault service for any gold or other precious metals you hold in a self-directed IRA or other retirement account.

When you are setting up your gold IRA, all new account transactions should include a discussion about where and how your gold bullion will be stored, as well as the costs and fees associated with that storage. 

Red Flags

Here are some of the most common indicators that someone is trying to scam you:

• Promises of high returns: If someone is promising you high returns on your investment, it is a good idea to be skeptical. Gold prices fluctuate. Gold has good years and bad years, like any other investment or commodity. No investment can guarantee high returns, and if it sounds too good to be true, it probably is.
• High-pressure sales tactics: If someone is pressuring you to act quickly or saying that the opportunity is only available for a limited time, it is a warning sign. People tend to throw caution into the wind if they think that a great deal is going to get away from them, but remember – gold isn’t going away. Instead, it’s going to be around for a long time. 

Legitimate investment opportunities should allow you time to research and make informed decisions.

• Deep discounts compared to spot price. Legitimate gold dealers never provide a significant discount from the current global spot price. They don’t have to.
  
  You should be prepared to pay approximately the current global spot price plus a small premium for any gold, silver, platinum, or palladium bullion. You should be suspicious if anyone is trying to sell you bullion at anything below the spot price. 
  
• Lack of transparency: If the individual or company is not providing clear information about the investment, including the fees and risks involved, it is best to stay away.
  
• Unregulated dealers: Be wary of investing with unregulated dealers, especially those that operate outside of the United States. Regulated dealers must meet certain standards and adhere to certain rules to protect investors.
  
• Overreliance on religious or other affiliations. As the Ephren Taylor case study demonstrates, scammers often exploit perceived commonalities and the perception of shared value systems. They may try to get you to let down your skepticism by approaching you as a fellow churchgoer, synagogue member, or someone with aligned interests.
  
  However, you should always remember to ask questions before allocating any money for an investment; especially if that certain investment is being advanced by someone who you wouldn’t normally expect to be giving investment advice (i.e., financial advisors).
  
• Strange meeting places: No legitimate gold IRA vendor is going to propose meeting you in a parking lot, restaurant, or hotel lobby to sell you physical gold, silver, platinum, or palladium bullion.

How to avoid getting stung by Gold IRA scams

To avoid falling victim to gold IRA scams (and other scams, in general), investors should be cautious of unsolicited offers, promises of making a quick buck, and high-pressure sales tactics. Instead, investors must remember that before they acquire any precious metals holdings, they must still do their due diligence to research the reputation of the company or individual offering the investment opportunity.

At a minimum, gold IRA investors and other precious metals investors should do the following due diligence: 

• Stick to established, reputable gold IRA companies. A reputable gold dealer will have been around for many years. 
• Avoid people trying to sell you gold bullion coins, proof coins, silver coins, etc. for your self directed IRAs via Facebook, Craigslist, or other similar sites (same goes for rare coins for your personal collection). 
• Verify that the company you’re dealing with is a legitimate IRA custodian, registered with the appropriate relevant regulatory agencies.
• Verify your sales’ rep’s license with FINRA. 
• Ask for any promises in writing, signed by a CEO or other officer of the company. 
• Check independent verified review pages. Reviews should be good, going back many years. Many established gold IRA vendors have track records dating back ten or twenty years. 
• Know the current market spot prices for gold, silver, and platinum, and palladium. Be prepared to pay at least the global spot price per troy ounce of metal, plus a premium. Listen carefully to the sales pitches and remember to be on the lookout for warning signs; for instance, anyone trying to sell much below spot price is almost always an indicator that you are dealing with a scam artist. 

Report Suspected Fraud

If you believe that someone you’re interacting with is attempting to steal your hard earned money, do not hesitate to reach out to your state attorney general’s office (and the Commodity Futures Trading Commission) to share your experience with them.

IRA scams can be difficult to spot, so let’s avenge those who have fallen victim to these scams and lost hundreds of thousands of dollars. Together, we can collectively bring these scam artists to justice.

To learn more about gold IRAs, scams (and how to avoid them), request your free “Ultimate Gold IRA Guide” below. You’ll be glad you did.