The regulator in the commodites markets (the CFTC) published a press release on December 5th, pointing to several companies that are involved with paper gold scams. The firms are accused to pretend to sell physical metals, but in reality the transactions do not involved real bullion. That’s a case of pure paper gold scam. This is how the CFTC described the practice in their press release:
The complaint further alleges that these statements were false, and that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions, according to the complaint. Defendants allegedly do not own or sell metals to customers; customers are charged storage and insurance fees on metals that do not exist; and are charged interest on loans, which are never made by the defendants.
The names of the companies are published in the press release. Thanks to Bron Suchecki for bringing the news fact to our attention.
We have repeated time and again on GoldSilverWorlds, to make sure your gold is allocated. Just as a reminder, we have created a checklist to help people in making the right choice when buying gold or silver.
(1) Is the investment structure of the service easy to understand (i.e. not complex)?
(2) Will you receive the bullion in case of insolvency of the market maker (the bank or brokerage firm)?
(3) Is it clear from the documentation that the title of specific physical bars is legally and directly transferred to you?
(4) Is it clear that you will NOT receive an IOU as a legal document with your purchase?
(5) Are the terms and rights concerning the insurance and security of allocated storage straightforward?
(6) Does the bullion come in the form of Good Delivery bars, and is it stored in the vault of a London Bullion Market Association (LBMA) member?
(7) Are you sure that you are not buying discount bullion, which is bullion at no premium to the spot price? Real physical bullion is not discounted.
The source of the article for further reading: Unallocated Gold Storage Or Accounts: Avoid This Risk When Buying Gold.