Investors Lose Over $100 Million in Silver Coin Scam. How to Buy Gold and Silver Safely

A Delaware court has ordered two companies and their owner to pay over $112 million in restitution and an additional $33 million in penalties. The decision follows charges of creating a fraudulent and deceptive scheme brought by the Commodity Futures Trading Commission (CFTC). For investors, it raises questions about how to avoid fraud when buying precious metals.

In a statement, the CFTC said Argent Asset Group and First State Depository Company and their owner, Robert Higgins, had defrauded investors out of tens of millions of dollars. Describing the case as "deeply troubling," CFTC Commissioner Kristin N. Johnson said the defendants had stolen customers' money "without even a veneer of legality."

Over 500,000 silver coins stolen

According to the CFTC, the fraudulent scheme was active between 2014 and 2022. Customers were falsely told their precious metals were both securely stored and insured. In reality, the defendants made off with over 500,000 American Silver Eagle coins and over 9,000 gold coins.

"The receiver found that Defendants brazenly left 'IOU' slips in empty boxes marked to indicate a customer's account, yet containing no assets," said Commissioner Johnson. The companies had said they were storing customer metals in a private depository, but the majority of the assets are missing. Quartz also reported that investigators found 36 ounces of gold hidden in the ceiling of Higgins' basement.

Unfortunately, the court ruling is unlikely to help many victims get their cash back. The commission warned that it "may not result in the recovery of any money lost because wrongdoers may not have sufficient funds or assets."

How to buy gold and silver without getting scammed

Gold and silver have gained traction with investors recently. Several factors have contributed to the popularity of precious metals. These include economic uncertainty, inflation, and the collapse of several high profile banks earlier this year. Gold, in particular, has a reputation as being a hedge against inflation, which adds to its appeal.

Every investment carries risk, and precious metals are no different. The price can go down as well as up, and it's important to buy from a reputable source. There are different ways to buy gold and silver. For example, you can buy gold bars or bullion directly from a store or vendor. You'll find both online and physical options, but either way, take time to ensure you're buying from someone trustworthy.

According to the CFTC, here are some red flags to watch out for:

• A promise of guaranteed returns: With any investment, the promise of guaranteed returns (especially high ones) is a warning sign. Nobody can know for sure whether the price of gold or silver will go up or down
• Not registered with the CFTC: You can call the CFTC at 866-366-2382 or look up the company at the National Futures Association website. Check to see if the business you plan to buy gold or silver from is registered, and whether there are any disciplinary actions against it.
• Unclear where your metals will be stored: If you're not keeping your precious metals at home, which brings its own security risks, ask a lot of questions about how your asset will be kept safe.

Bear in mind that you don't always have to buy the physical metal. Another way to invest in gold and silver is to buy gold ETFs from a top stock broker. ETFs -- or exchange-traded funds -- let you buy into a basket of securities, such as equities or commodities. A precious metal ETF works in the same way as one that contains stocks.

Going the ETF route has several advantages. Not only can you invest in them from your brokerage account and manage various investments in one place, but it also means you don't need to worry about some of the challenges that come with owning precious metals. If you own physical gold, you may need to insure and store it.

Some brokerages also allow you to buy gold futures, which are a type of derivative. If you're considering this route, make sure you understand the pros and cons of derivatives trading. Finally, you might opt to buy stocks in companies connected to the precious metal industry, such as gold-mining stocks. If you want to buy gold or silver, weigh the different options to see which one might suit your investment style.