Silver_Coins

Metals – The Short Con And the Long Con

Did you know that “Liberals are seeking to siphon money from successful Americans” and “They want to feed their grandchildren before yours!”

Depending on the strength of your reaction to that statement, I might have something to sell you for your retirement account.

That claim in quotes above is from a Facebook advertisement by precious metals company Metals.com or its affiliates. Metals.com does business under other names Chase Metals LLC, and Chase Metals Inc, Access Unlimited, and is owned by parent company TMTE.

Unfortunately for folks who responded to that pitch, the company has a history of fleecing its customers, according to actions taken by regulators in seven states. 

In Texas, the State Securities Board kicked off a torrent of state regulatory action last May, with a Cease and Desist Order.

The State of Texas complaint notes the example of an 80-year old woman convinced to transfer her entire $850 thousand retirement account into another account – affiliated with Metals.com – that could hold precious metals, disregarding its appropriateness for her situation. In addition, in April 2019, the Securities Board complaint continues, the firm’s lawyer sent a threatening “Pre-Lawsuit Notice” to a 75-year old retired schoolteacher who publicly complained about investing nearly $66 thousand with Metals.com.

As part of the sales process, the Securities Board found, salespeople convince elderly prospects that their existing investments in securities are highly risky and imminently in danger. Only precious metals, the pitch went, can provide safety in retirement.

But this company does not target just any elderly prospects. An investigation by Quartz.com described their particular strategy of Facebook targeting.

The Quartz investigation details how Metals.com’s sought to exploit political biases. Specifically, Facebook advertisements targeted a demographic that identified as “very conservative,” over 59, and “interested in” Fox News’s Sean Hannity.

Further, the Facebook ads that led to Metals.com strongly implied linkages – linkages that do not exist – with Fox News. Facebook ads used Fox News logos, and unaffiliated websites like www.foxbusiness.com.co that would appear linked to the media company. Metals.com ran ads that sounded like they originated from political and governmental bodies, although they did not, with sponsors named “Republican House Committee,” “US Retirement Bureau,” and “Conservative Republican Association.” 

These online ads encouraged Facebook users to sign up for more information about how silver and gold investment strategies could protect them from the Deep State and from a grasping federal government. 

With an ad supposedly sponsored by an account called “Proud To Be A Deplorable,” the message asked “Is your retirement protected from the Deep State? A newly-liberal majority Congress cares more about chaos than your security!” 

Commissioned salespeople would contact potential victims, initiating a conversation about politics or religion. A former salesperson for the company, interviewed by Quartz, said his instructions were “if someone says they’re liberal or they don’t like Hannity, you just hang up.”

Another opening sales line to use on prospects was “I don’t know what your religious beliefs are, but I’m Christian. Did you know there are 700 references to gold and silver in the Bible?”

The solution to everything, apparently, was gold and silver investments.

In July 2019, Metals.com agreed to an Order with the Texas State Securities Board to offer refunds, up to $10 million, to 84 customers in Texas of the full amounts they invested in precious metals with the company.

The company’s troubles are not over, however. Following Texas’ lead, at least six other states have initiated enforcement actions against Metals.com and its affiliates. The latest was a complaint in December 2019 from the Securities Division of the Secretary of the Commonwealth in Massachusetts.

That Massachusetts state filing details one couple that transferred $2.3 million from their retirement account from a Fidelity IRA to a precious metals account at the direction of a Metals.com salesperson. Due to the heavy markups employed by the company, the account suffered an immediate $1.5 million drop in value. Transactions by this couple and others described in the Massachusetts enforcement action suffered markups between 53% and 63%. 

As further described in the complaint, Metals.com provided statements showing values in the precious metals had increased, despite observable prices that made those claims fraudulent.

One plausible financial lesson we could take from the Metals.com enforcement actions would be to beware pushy salespeople using scare tactics and political biases to push expensive, inappropriate investments on vulnerable people. And that’s fine advice. But that advice seems to limit the story to the unsavory tactics of a rogue boiler-room operation.

A would urge a more general lesson, one that goes far beyond the frightening Metals.com story: Never, ever, buy precious metals as an investment. 

Gold, and other precious metals including silver, are always primarily a psychological trick used to prey on the financially naïve. Massive segments of the financial infotainment industrial complex dedicate themselves to selling us on the idea that gold and silver have a legitimate role in an individual investor’s portfolio. 

This simply isn’t true.

So yes, beware of boiler-room operations like Metals.com, still apparently in business today, despite multi-state enforcement action against them. But also consider, if you didn’t know this already, that the entire retail-investment arm of the precious metals industry is itself a long con.

Phone calls to Metals.com went unreturned, as did an inquiry through their website.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related post:

Never buy Gold

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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