Hundreds of depositors who gave a silver dealer millions in exchange for precious minted coins were told their vaults were indeed empty, following an investigation by the US Commodity Futures Trading Commission (CFTC).
Two companies run by precious metals dealer Robert Higgins have been ordered to pay victims of an alleged complex fraud scheme $112.7 million and a $33 million civil fine.
Investigations into Higgins and two related companies began last year.
According to a CFTC statement, between 2014 and 2022 Higgins ran a fraudulent silver leasing program through two companies: Argent Asset Group LLC (Argent) and First State Depository Company, LLC.
The property, sold to customers as the “Maximus Program,” offered silver coin owners payment of a lease in return for Argent's use of the commodity.
Payments came on a “scale,” increasing or decreasing depending on how many coins the customer was willing to offer.
The coins were either already owned by the customers or could reportedly be purchased through Argent and were apparently held in a vault at the First State Depository Company in Delaware.
Clients were also told that their investments were guaranteed and fully insured.
Coins like these — silver American Eagle dollars — are often bought by investors who want something tangible for their money, as opposed to government bonds or stocks.
People buy the coins because, even though they only have a face value of $1, they are 99.9% fine silver and therefore retain their value as a precious metal rather than currency.
The gold bars are also manufactured by the US Mint, which guarantees their authenticity and is minted in limited numbers to guarantee their rarity. Currently, uncirculated 1 ounce silver coins from the 2023 issue can be purchased for $76 each.
Customers also felt they had been keeping an eye on their earnings from the coins, as they were being sent monthly reports by the company that prosecutors said were “false statements”.[ed] that the assets remained safe with FSD.”
Court documents show that large amounts of the coins apparently stored at the FSD facilities simply did not exist.
Documents released on June 20 show Baker Tilly accountants visited the vault to conduct an inventory check and found nearly $113 million missing in client and client assets.
“In some cases at FSD, they found empty boxes with a customer or client's name on them, or boxes that didn't contain any metal but instead contained some sort of ‘promissory note' – a piece of paper that stated the amount of metal that should have been there.” saved,” the document said wealth continues.
It goes on to say that in some customer cases, no records were kept at all – not even an empty box with her name on it.
More stock seen by wealth show that Baker Tilly expected to find about 1.2 million Silver American Eagle coins and instead discovered just under 380,000.
Likewise, accountants expected to find 11,125 American Eagle gold coins and only discovered 1,936.
As a result, attorneys for the CFTC allege that the defendants “misappropriated” the coins, either by using them for their own benefit or by selling them.
The CFTC also alleges that some customers who paid for more bullion never received it and instead the parties pocketed the money.
CFTC Enforcement Director Ian McGinley said he was determined to “root out fraud in the precious metals market.”
However, the agency pointed out that while the clients have been awarded damages, there is no guarantee they will get the funds back as the defendants may not have sufficient assets.
Customers looking for updates on this case can find them on the First State Depository Company's website, which has been taken over by the administrators.
Higgins representatives did not immediately respond when approached wealth for comment.
This story was originally published on Fortune.com
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