Types of Scams in Coin Fraud and Precious Metals Fraud

A Tale of Exploitation


Meet Susan, a retired widow in her late 70s, living on a fixed income. Having inherited a small coin collection from her late husband, she was unexpectedly entangled in a distressing situation. This cautionary tale sheds light on the deceptive practices of a coin dealer who took advantage of Susan's vulnerability, leaving her without her beloved collection and facing an uphill battle for justice.

The Cold Call:

One day, Susan received an unsolicited phone call from a seemingly reputable coin dealer. Intrigued by the offer to purchase her coin collection for $15,000, Susan saw an opportunity to alleviate her financial burdens. Having already contemplated selling her collection, she cautiously agreed to the deal and sent the coins to the dealer.

Broken Promises:

Shortly after mailing the coins, Susan received a disappointing phone call from the dealer. Due to an unforeseen drop in the price of gold, the dealer reneged on the initial agreement and proposed a reduced payment of $7,500. Feeling deceived and undervalued, Susan decided against selling her coins and demanded their return.

A Frustrating Ordeal:

Susan's attempts to retrieve her coins and secure fair compensation became frustrating. Despite her persistent calls, the dealer continually postponed the return of her collection and failed to process any payment. Susan's pleas went unanswered, and her messages went ignored, leaving her distressed and confused.

False Hope:

After weeks of persistent inquiries, the dealer finally sent Susan a different collection of silver dollars, claiming they were valued at $15,000. Skeptical of this sudden turn of events, Susan sought an independent appraisal of the silver dollars and her original set. Shockingly, the appraisal revealed that the silver coins were worth only $1,500, while her original collection had a fair market value of $20,000.

Denial and Disregard:

With evidence of the dealer's deceptive tactics, Susan promptly contacted the dealer to rectify the situation. However, her calls were met with evasion as she was shuffled around from one person to another. The dealer ignored her messages, displaying a complete lack of accountability. Moreover, he refused to return Susan's coins or offer her the fair market value she rightfully deserved.


Susan's unfortunate experience with the unscrupulous coin dealer is a stark reminder of the vulnerabilities that retirees and individuals on fixed incomes face when targeted by exploitative practices. It emphasizes the importance of legal safeguards and ethical conduct within the coin-collecting industry. By sharing this cautionary tale, we aim to raise awareness and empower individuals like Susan to protect their rights, seek legal recourse, and deter unscrupulous actors from preying on the unsuspecting.

thief holding stolen coin

Dishonest coin and precious metals dealers and telemarketers are creative and aggressive. There is no shortage of tricks they will use to sell coins or bullion to unwary investors at grossly inflated prices. Coin fraud scam artists are often difficult to identify. They hide behind their telephones or websites, so you never meet them face to face. They may use false names when talking to you. Their sales tactics are carefully scripted and rehearsed so that they are convincing but intentionally misleading—or downright lies. They may display professional-looking offices, employ “account executives” or “investment counselors,” distribute glossy brochures, boast of their investment expertise, and generally portray themselves as reputable businessmen. But they are not in business to make an honest dollar. Rather their “business” is to con you out of as much of your life savings as they can.

While there probably are as many types of precious metals scams are there are coin fraud scammers, we have identified a number of fraudulent practices which are commonly utilized by the bad actors in the precious metals industry.

False Appreciation Claims

Dishonest coin and bullion dealers often mislead buyers by quoting appreciation rates for collectible coins from an annual index formerly compiled by Salomon Brothers, a defunct Wall Street investment bank. These quotes typically show appreciation of 12 percent to 25 percent a year.  The Salomon Brothers index, however, was based on a list of twenty very rare coins, while coins sold by dishonest dealers typically are more common and not likely to appreciate at the same rate, if at all.  There is no guarantee that any coin will appreciate in value.  Falsely guaranteeing coin appreciation rates is known as “pitching heat” in the industry.

False Claims about Bullion Coins

Bullion coins are not rare coins.  Their values are determined by their precious metal content rather than by rarity or condition. Bullion coin scam artists mislead consumers into buying “coins” that are not really coins at all—such as imitation medals created by private coin mints.  Unscrupulous bullion coin sellers often overprice their coins and misrepresent the population or availability of bullion coins in an attempt to pass off ordinary bullion coins as rare collectible coins.  Others may sell bullion pieces with the same design as coins from the U.S. Mint but in different sizes.  Since bullion is based upon the precious metal content, the dealers sell the smaller coins, at similar prices as larger coins, to customers at grossly inflated prices.

False Claims about Current Value

Some dealers engaging in coin fraud or precious metals fraud grade their coins accurately but overprice the coins and/or mislead consumers about the value of the coins.  For example, a dealer may charge $2000 for an accurately graded $20 Double Eagle gold coin even though the actual retail value of the coin may only be $750.  In other words, an unscrupulous coin and precious metals dealer may charge significantly more than a coin’s actual value even though the coin is accurately graded.  False claims about current value are becoming increasingly popular in the world of coin fraud and precious metals fraud.  Grading costs dealers very little but provides them with a sales pitch to inflate coin prices substantially.

False Grading

Usually, the value of a collectible coin is determined by its grade and rarity, so it is very important that rare coins are graded correctly.  The grade of a rare coin is shorthand for describing its condition.  The grading process, however, is subjective, which can cause the grade assigned to a particular coin to vary among dealers.  Fine distinctions between grades can mean big differences in the value or price of a coin.  A reputable grading company, such as PCGS or NGC, will use consensus grading techniques by highly trained, disinterested graders.  Additional grading certification by such companies as CAC give collectors additional confidence that they own properly graded coins.

Dealers engaging in coin fraud or precious metals fraud often inflate the grade of their collectible coins, charging prices substantially higher than a coin’s actual value.  Some dealers grade their coins in-house or through less-than-reputable grading services.  Others create counterfeit grading documents or place lower-grade coins in cases labeled with a higher grade.

Graded Coin Fraud

Dealers engaging in coin fraud and precious metals fraud use grading services to improperly increase the value of bullion coins. Rare coin dealers also may engage in graded coin fraud. For example, since the bulk of Gold Eagle and Silver Eagle bullion coins have never been touched by human hands, most newly minted Gold Eagle and Silver Eagle bullion coins should grade very high, and many are graded MS-70, the highest grade awarded. Gold fraud scam artists will have a reputable coin grading service grade a coin but sell it to an unsuspecting customer for several times its true value. Truthfully, anyone can purchase random Eagles and submit them for grading for a small fee. When telemarketers try to use grades to sell you bullion, this is nothing more than telemarketer mumbo jumbo.

Coin grading services generally fall into one of three tiers recognized by the industry based on the grading service provided. The top tier consists of Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC). There are other grading services that do not employ high-quality techniques to ensure consistent dependable grades. A dishonest rare coin dealer may quote a “first tier” value for a rare coin as if it had been graded and encapsulated (“slabbed”) by a “first-tier” grading service when, in fact, the coin was over-graded and slabbed by a “lesser” grading service. Always check who graded the coins you are buying and research their reputation.

Beware of Certifications

There are various types of certifications that are used for different purposes. There are highly reputable grading certification services, like Certified Acceptance Corporation, commonly referred to as CAC, that consumers use to verify the grade of a coin. These services certify coins as to grade and usually provide specialized labels to signify this certification.

There are also certification services provided by grading companies solely for the purpose of luring potential customers into buying coins. These certifications are usually by celebrities and past US Mint Directors. If you know the coins and the market, these are interesting but add little to the value of the precious metal.

However, dishonest coin dealers often use these “certifications” as part of fraudulent sales schemes designed to mislead consumers. Everyone likes celebrities and recognized leaders. In fact, sales are made every day due to the recommendations of these individuals. However, it has become a common practice of coin dealers to use such certifications as part of fraudulent sales schemes designed to mislead consumers into paying exorbitant prices for bullion coins. The certifications add no value to the precious metal and are there to lure your money away.

Leveraged Investment Scams

Leveraged investments are high-risk investments that can result in an investor losing more money than he or she intended to invest. In a leveraged investment scam, a dealer engaging in coin fraud or precious metals fraud typically represents that the price of a precious metal is about to skyrocket, and an investor can generate a significant profit by making a small down payment for the metal—often as low as 20 percent. By paying only a portion of the purchase price down, an investor can control more of the precious metal than if 100 percent of the purchase price was paid.

In a leveraged investment scam, an investor actually borrows money from a lender that promises to hold the precious metal for the investor in exchange for payment of storage fees. Rather than sending an investor a monthly bill for the fees, the lender will reduce the investor’s equity in the investment. Once the equity falls below a certain level (for example, 10 percent of the purchase price plus the accrued monthly fees), the lender will issue an “equity call,” requiring the investor to pay additional money to bring the equity above the equity call level.

If an investor does not pay the additional funds, the lender will sell the precious metal investment to pay off the loan. If the sale does not cover the amount owed on the loan plus the interest and the fees, the lender will send the investor a bill for the difference.

False Re-Stocking / Buy Back Options

Many coin and precious metals dealers offer “buy back” options to give their customers a sense of security about their investments. Customers must be aware of these provisions. On bullion, where the price of precious metals is constantly changing, buy-back options may come with a loss of market value, which is a legitimate charge. However, on semi-numismatics and numismatics, disreputable sellers may refuse to honor the option, provide short periods to qualify or fail to disclose fees and commissions relating to the options. They will claim the time has expired or assert the right to a “re-stocking” fee or charge. Historically, re-stocking charges were legitimate charges used by retailers to capture operations costs and handling charges for returned items. However, coin dealers will set these fees at a percentage that bears no relation to actual costs or expenses related to the return of the coins. They use these fees to intimidate or stall customers until the customer abandons their efforts out of frustration. Reputable dealers will waive this fee or charge if there has been no legitimate change in the value of the semi-numismatic or numismatic coins.

Most “buy-back” options require a very long holding period that seems to get longer over the years. Such holding periods are meant to stall and convince you to wait for investments to “appreciate” that never come. Other hurdles in buy-back options may include exorbitant consignment fees that rob you of any gains in the market that you might have used to offset the original price.

Scam Auction Sites

There is a number of auction sites that sell precious metal and numismatic coins claiming fantastic values for highly graded coins. Beware, many of these auction sites are knowingly selling coins that have been cleaned and graded by unknown grading companies. Some auction sites are known to re-package graded coins and have them graded by unknown graders that grade them higher to mislead you. Auction services may believe that they are protected because they are simply repeating the coin grade or value given by the seller. However, since the commission and fees earned by the auctioneer are based in part on the coin’s selling price, they need to be aware of any problems such descriptions and representations pose. If the auction house has knowledge that the coins are materially misrepresented in grade, then they can be liable for selling the coins.

We investigate to determine if:

  1. the auctioneer knows of the misrepresentation
  2. has the auctioneer taken any steps to ensure that the products it auctions are legitimate
  3. is there a history of questionable graded coins on the auctioneer’s site
  4. has the auctioneer ignored past grading problems by certain sellers on its site
  5. what steps has the auctioneer taken to ensure that any fraud that has occurred has been corrected

Clad Coins

Clad coins are over-hyped as “must-own” coins that usually sell for less than $20 each. For example, the $50 Buffalo Gold Coin is a replica coin clad in 14 milligrams of pure gold that is typically marketed and sold for $9.95 each. It is not a true gold coin, nor is it legal tender, redeemable at a bank, or even rare. Thus, for example, if gold is selling for $50 per gram (or $0.05 per milligram), a $50 Buffalo Gold Coin with 14 milligrams of gold cladding selling for $9.95 is actually worth $0.70.

Other Legal Claims

Other legal claims exist against dealers engaging in coin fraud or precious metals fraud for:

  1. Buying back coins at a fraction of the original sales price after putting consumers in strained financial situations.
  2. Misleading consumers about the markup on coins, failing to disclose the real markup, and failing to disclose that a “middle-man” company was unnecessarily established to add an additional markup on the coins.
  3. Advising consumers to take money out of safe investments, such as stocks, certificates of deposit, and bonds, to purchase coins or bullion at grossly inflated prices.
  4. Stealing a customer’s coin, selling it, and pocketing the sales proceeds.

If you have been victimized by a dealer engaging in gold fraud, coin fraud, or precious metals fraud, you may have one or more of the above legal claims.  Please Contact Us or call us409-880-9714. You will talk to a lawyer; there is no obligation, and the confidential consultation is free.