10 Tips to help you avoid “rare coin” scams: Internet ScamBusters #238
Today’s issue is on rare coin scams.
Collecting rare coins or those minted from precious metals can
be a fascinating hobby and can be a good financial investment
— but only if you’re knowledgeable about coins AND how
fraudulent dealers operate.
Historically, rare coins and “bullion” coins (ones minted from
gold, silver or platinum) have made good “hedges” against
inflation and economic downturns, which is EXACTLY the pitch
scammers use to entice unwary investors.
According to the Federal Trade Commission (FTC), dishonest
coin dealers can be difficult to spot.
Some “rare coin” scammers prey on senior citizens’ fear of
another “Great Depression.”
By following our 10 tips, however, you’ll discover how to spot
dishonest coin dealers and their misleading claims.
Note: This issue focuses on the SCAM aspects of rare coin
investing. We are definitely not experts about rare coins, and
are not providing any financial, investing, accounting or
legal advice. We are simply focused on helping you protect
yourself from getting scammed in the event that you decide to
invest in rare coins.
Before we get started, we have two announcements. First, with
the launch of the Apple iPhone on Friday, June 29, we’ve prepared a special
page on iPhone scams.
Second, we wanted to give you an update on our position
regarding LifeLock Inc.
As you probably know, there has been controversy about
LifeLock’s co-founder Robert Maynard. We reviewed the issues
for you in ScamBusters #234, as well as on our href="http://www.scambusters.org/identity.html">first update on
We also told you we’d keep you updated.
As you know, we had temporarily stopped recommending LifeLock
and had pulled down the interview Audri did with Robert
because there were questions about the accuracy of Robert’s
story. Many of the questions raised about Robert’s story
remain unanswered, and so the interview with Robert remains
off the ScamBusters website.
Most important, though, is that in the interim, Robert Maynard
has resigned from the company.
Further, there is an
target="_blank">interesting article by Michael Arrington
that suggests that more could be going on here than meets the
In any case, Robert is staying on as a consultant, which makes
some people uncomfortable. Nonetheless, since the reasons we
had stopped recommending LifeLock were questions about Robert,
and not the company, and since Robert has resigned and no
longer has any access to customer or financial information, we
will again be recommending LifeLock.
We truly believe LifeLock offers a terrific service — in fact,
we have found nothing else comparable after searching for
several years. We believe LifeLock offers an easy and
inexpensive way to dramatically reduce the chance you’ll
become a victim of identity theft, as well as providing the
peace of mind of not having to spend hundreds of hours fixing
the problem in the event that your identity is stolen.
So, we are continuing to recommend LifeLock because we truly
believe in their service. We plan to continue to use it
ourselves and for our families.
We did want to advise you of the issues so you can make your
As always, we suggest you visit last week’s most popular
articles from our other websites:
Tips for How Your Kids Can Help Prevent Identity Theft: What to tell
your kids about href="http://www.identitytheftfixes.com/kids_need_to_prevent_identity_theft_too.html"
target="_blank">identity theft to keep them safe.
What Married Couples Need to Know About Credit Cards: Having this talk on
target="_blank">credit card use could save your marriage, or make it less financially stressful.
Are Free Internet Resources Really Free? Tips for finding out what’s
really a href="http://www.consumersavvytips.org/are_free_internet_resources_really_free.html"
target="_blank">free Internet resource — and what’s not.
Fighting Summertime Gas Prices: These finders of great
target="_blank">gas prices can be a huge moneysaver for
Time to get going…
Heavy Metal: How to Avoid “Rare Coin” Scams
Serious coin collectors (known as numismatists), sometimes see
big returns on their investments — whether they’ve purchased
rare coins or modern gold coins like the American Eagle,
Canadian Maple Leaf or the South African Krugerrand.
Because of this — and because the value of these coins tends
to rise during periods of high inflation and recession — some
“amateurs” are tempted to risk their savings on promises made
by dishonest coin dealers.
How much money have people lost? In one recent example, a
handful of Texas companies bilked investors out of nearly $13
million by promising that the coins would double or triple in
worth. They didn’t. And these customers later learned that
they’d been charged three times the coins’ actual value!
(Some have since sued the offenders.)
“Tough Nuts” to Spot
The case above highlights the widespread problem of coin scams
in the U.S. Worse: “It is very difficult to identify
fraudulent sellers of rare and bullion coins because they
often look like legitimate dealers,” reports the FTC.
“For example, fraudulent sellers frequently have elegant
offices in the financial districts of major cities, employ
‘account executives’ or ‘investment counselors,’ and produce
glossy, attractive brochures on investment strategy. They may
claim to have leading coin experts on their staffs, or claim
to be the largest or finest dealers in the business.
“Also, fraudulent sellers of rare and bullion coins often use
many of the same techniques as legitimate dealers to attract
buyers. Some advertise in newspapers and magazines and
sometimes meet prospective clients through financial planners
and insurance agents.” Others use telemarketing, email and
“snail mail” campaigns.
Your best scam-prevention strategies are to (a) avoid
investing in products you know little about; or (b) learn as
much as you can about the coins you want to buy — from
financial and numismatic journals, as well as trusted experts.
10 Tips to Avoid Rare Coin Scams
If you simply MUST buy 1882 Morgan Silver Dollars or $10
Indian gold pieces, read the following tips we’ve condensed
from an href="http://www.ftc.gov/bcp/conline/pubs/alerts/coinalrt.shtm"
target="_blank" rel="nofollow">FTC report.
Use common sense when evaluating investment claims. Don’t
rush to buy.
Conduct research on a dealer’s reputation and reliability.
If possible, discover how long the company has been in
business. And if a dealer claims to be a member of a
professional organization, call that organization to make sure
their claim is true.
Don’t be fooled by promises that a dealer will buy back
your coins at (or for more) than what you paid, or that
“grading” (evaluation of a coin’s condition) is guaranteed.
Get a second opinion about grade and value as soon as you
receive your coins. And before you buy, determine which
remedies you have if the second opinion differs. Check
information you’re given. For example: will the full purchase
price be refunded or will you be given credit against the
purchase of other coins?
Check the grades of coins with an independent source. Be
cautious about grading certificates and “slabs.” Many people
use third-party grading or certification services before they
buy. These companies “certify” the grade of coins and often
place them in plastic holders with some form of grading
certificate or “slab.”
But you can lose money even when you use a certification or
grading service. Certification services provided by dishonest
coin dealers are often part of the fraudulent sales scheme.
In some cases, even certificates or slabs from legitimate
services can be misleading.
For example, some certification services use looser standards
than those generally accepted by dealers in the rare coin
market. Because of this, coins they certify may be worth less
than other coins of the same grade.
Comparison shop. Consult several dealers before buying.
Check prices in leading coin publications or sight-unseen
trading network lists to ensure you’re not being overcharged.
If a dealer’s advertised price is much lower than the prices
listed in these publications, he may be misrepresenting the
quality or grade of the coin.
Take possession of the coins you purchase to ensure they
actually EXIST and to be sure they’re properly stored.
Be wary about giving your credit card number to strangers,
especially over the telephone.
High-pressure sales tactics should raise “red flags.” If
the investment is so wonderful, why must YOU invest? There
should be plenty of other “fish in the sea” for this salesperson.
Beware of the Salomon Brothers Index. Dishonest dealers
often mislead buyers by quoting appreciation rates for rare
coins from an annual index formerly compiled by the New York
investment bank Salomon Brothers. These quotes can show
appreciation of 12 percent to 25 percent a year.
The Salomon index, however, was based on a list of 20 very
rare coins, while the coins sold by dishonest dealers are more
common — and less likely to appreciate at the same rate, if
Keep in mind, though, that almost all dealers, legitimate and
otherwise, have used the Salomon quotes. Therefore, it’s
important to choose your dealer carefully.
To report problems with a coin dealer, contact the following
The American Numismatic Association (ANA). If the
dealer is a member, write to the Association at 818 North
Cascade Avenue, Colorado Springs, CO 80903.
The Industry Council for Tangible Assets (ICTA), a
national trade association of coin and precious metals
dealers. Regardless of whether the dealer is a member, write
to ICTA at P.O. Box 1365, Severna Park, MD 21146.
The Professional Numismatists Guild (PNG), an
organization of coin dealers and numismatists. If you have a
complaint against a PNG member, write to PNG at 3950 Concordia
Lane, Fallbrook, CA 92028.
Remember: all that glitters is not gold, but by following the
tips above, you’ll ensure that (at least) you’re buying
genuine rare or bullion coins at a fair price, not wooden
That’s a wrap for this issue. Wishing you a great week!