How to Spot Fraudulent Commodity Brokerage – Learn to Spot the signs that a broker may be fraudulent. For example, fraudulent firms are likely to purchase Precious metals of low purity, meaning that the value of your investment is immediately reduced by the amount you hand over. To avoid this type of investment, find a legitimate firm with detailed and transparent cost information, a physical address, and a telephone number to contact customer service.
Precious metals are an area attractive to fraudsters
Fraudulent investment activities have long been a problem in the precious metals industry. The biggest Ponzi scheme in history, the Bernie Madoff investment scam, cost victims nearly $65 billion. Fraudsters use a slick sales pitch to lure unsuspecting investors into purchasing high-priced precious metals. Unfortunately, these investments typically yield low-quality metals that are worth much less than the investment itself. In addition, fraudsters charge high sales commissions, often as much as 50%. Many countries have not regulated precious metals dealers, making them an attractive target for fraudulent activity.
Despite these concerns, there are a few things that you can do to protect yourself from such predators. First, make sure that the company you are dealing with is registered with the SDIRA. This agency helps protect investors from fraudulent companies. Second, verify the seller’s background by looking up the company online, such as BrokerCheck. Also, be wary of offers to buy precious metals on margin. Make sure to understand all the fees and costs involved.
Fraudsters often employ apocalyptic claims to lure investors. While such an appeal may seem legitimate, it’s not uncommon for salespeople in other areas of investment to use such scare tactics. One recent example was Kenzley Ramos, who solicited investment for a phony foreign exchange trading pool. The salesperson claimed investors would be able to profit from the coronavirus through currency trading. However, after being contacted by the Commodity Futures Trading Commission (CFTC), Ramos was found to be a fraud and ordered to pay $27,000 in restitution.
Precious metals of low purity are acquired – meaning your investment is immediately worth less than you are handing over
To spot a fraudulent commodity broker, be sure to pay close attention to the fine print. Most companies will not use the money you invest in purchasing metals. Instead, they will use it to pay themselves commissions. They will also fail to disclose the additional costs involved in fluctuating prices. They may also promise low returns and limited supply. In addition, they will often fail to tell you that they do not store the metals at independent facilities.
Fortunately, it is possible to buy precious metals through legitimate dealers. You can do so online or in a physical location. There are several types of bullion, and prices vary widely. Make sure you know the difference between spot and wholesale prices. Wholesale prices are lower than spot prices.
If you are buying precious metals online, avoid buying from third parties. This includes websites run by China and big box retailers. Instead, buy from reputable sellers who purchase directly from the Mint.