CFTC Monex Lawsuit Shows Exactly What To Look For (and not) in a Bullion Dealer

The CFTC just sued a California gold dealer in what is reported by Reuters as the biggest ever retail precious metals fraud enforcement action brought by the regulator.  The action taken yesterday is a reminder for everybody about what to look for in a gold and silver dealer…

The key to purchasing precious metals is to finding a trustworthy, reputable dealer with a focus on offering the best possible price AND the best service to go with it. 

As of yet, this case is merely filed, so no further action has been taken, but it highlights a few things that everybody should look out for as the precious metals bull market takes of in earnest. Here’s some of the highlights from Reuters:

The U.S. Commodity Futures Trading Commission (CFTC) said on Wednesday it filed a civil lawsuit against California-based gold dealer Monex Deposit Co in what it called the biggest-ever retail precious metals fraud enforcement action brought by the regulator.

The CFTC alleges Monex, deploying high-pressure sales tactics, deceived thousands of retail customers who lost a total of $290 million in connection with illegal, off-exchange leveraged precious metals transactions.

According to the complaint, between July 16, 2011 and March 31, 2017, Monex defrauded over 12,000 trading accounts, many of which were owned by elderly customers, through outsized price spreads on trades, commissions, interest on loans and administrative fees.

Simple shipping costs known up-front, not piling on excess fees and commissions, and not wrapping or bundling bullion products with loans are some of the things to look for in a dealer.

Here are some warning signs that investors may want to take into consideration and begin looking elsewhere for a reputable dealer:

  • Unallocated storage of metals (meaning there is a pool of metal that people “own”, but each owner’s metal is not kept separate).
  • High commissions and  high pressure sales.
  • Confusing and expensive shipping costs.
  • Confusing and lengthy terms and conditions.
  • Hybrid products such as partial ownership of metal via “shares” of “gold units” and other similar products.
  • Companies that offer in-house “loans” to buy “bullion” that can result in rapid forfeiture of metal based on late payment.

Picking a precious metals dealer is not easy, and it is crucial to make the right choice, especially for those new to precious metals.

In other words, before deciding what to buy, it is more important to know who to buy from.