Lessons from $362.5 Million in Alleged Silver Gold Scams

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by James Anderson, Gold Seek:

One dealer bankrupted in 2016 with two of its directors indicted in April 2018 on fraud charges. The other dealer still gets over from its 1980’s branding yielding high volumes of google searches, and thus possibly churning and burning new novice customers every day. Allegations of fraud total $362.5 million USD in lost customer and vendor funds combined.

#1 Silver Gold Scam Indictment: Northwest Territorial Mint

For those who were paying attention or had perhaps even done business with them, the following Northwest Territorial Mint (NWTM) news may not be all too shocking.

Following the 2016 Northwest Territorial Mint bankruptcy, in April 2018 the Washington state Division of Financial Institutions filed an indictment of company head Bernard Ross Hansen (57), as well of his company’s vault manager and alleged girlfriend, Diane Renee Erdmann (45).

This story has various lessons for all bullion buyers and owners which we conclude with, regardless whether or not these two individuals are convicted and proven guilty in a court of law.

Alleged details and accusations of 20 federal felonies are rather gory in scope and size:

– NWTM operated a Ponzi-like scheme.

– Constantly lied about shipping times for customer bullion order deliveries.

– Improperly used customer capital to expand the NWTM business to other states.

– 50 people who stored their bullion with NWTM found all of part of their bullion worth $4.9 million USD supposedly missing.

– 20 customers involved in a bullion leasing program were allegedly defrauded of more than $5 million USD.

– One Canadian silver bullion producer possibly lost more than $1 million USD in silver bullion.

– Over 3,000 customers paid for orders, or made bullion sales or exchanges, that were either never fulfilled or never refunded to date. The total loss to these customers totals more than $25 million USD alone.

– As of now, over 3,000 creditor claims has amassed a mostly unsecured creditor filing of nearly $72.5 million USD against bankrupt NWTM.

Sadly, if history is any precedent, unsecured creditors will be lucky to get dimes and even pennies on their dollars owed (you can even see some of the alleged professional hourly rates being charged ranging from $900 to $90 USD per hour).

Most of the functioning capital remaining (facilities, dies, machinery) will likely be auctioned off at fire sale prices, much of the proceeds used in paying professionals to oversee the matter.

This AUTHOR’s + OTHER’s Experiences with NWTM

One of my first tasks at SD Bullion was to create this free 21st Century Gold Rush guide. Within it I offer various free tools and common sense approaches you can use in order to avoid doing business with companies that may end similarly to this latest NWTM bankruptcy.

Like any industry, the physical bullion dealer market has good, bad, and incompetent actors.

It is often the incompetent and nefarious actors who end in bankruptcy, lawsuits, and even prison terms. Indeed many outfits who pose as safe havens end up being the exact opposite.

Throughout my first few years of buying bullion, I made many common beginner mistakes (purchasing shares of ETFs, speaking to and even buying from poor business practicing dealers, etc.).

Of course it is always best in life to try and learn first about how to avoid making potential mistakes before errantly making them yourself. Yet in late 2007, the internet was less robust in terms of organic bullion dealer consumer review websites (most were simply paid rig jobs). All that really existed at the time were various curmudgeon precious metal forums and the BBB which remains suspect as I have further detailed here.

I personally made many phones calls and inquiries around the bullion industry in 2007, and at the time most silver and gold dealers were using the 1980s / 1990s bear market boiler room model of trying to flip would-be bullion buyers into non-rare overpriced granddaddy gold and silver coins (semi-numismatics, anything is confiscatable by the way).

The high profit margin portion of the silver and gold industry has since shifted in part to low-mintage exclusive private rounds and government minted coins. The higher premium coins and rounds whose true value regardless of what any marketer or salesmen might allude, is only really what a dealer or perhaps an individual on eBay might pay (minus all the fees of course). But that’s another topic for another day.

In late 2007 (use the wayback machine to verify), NWTM looked like a pretty reputable company that had rather transparent buy and sell prices published live on their website (believe it or not, this common sense approach was actually cutting edge for the day).

I myself decided to put a test 100 Silver Bar bullion order with NWTM in early 2008 and here were the results after many months and a few badgering customer service phone calls I had to make later.

Yes indeed, you read that correctly. It took an embarrassing five months for delivery.

Of course this amount of time blew well past the guideline ‘legal’ 28 day for commodity delivery timeframes selectively enforced by the CFTC and other state prosecutors.

Lesson was learned, my business was never done with NWTM again. Over the years, it was obvious based on customer feedback online and through rumor not much had changed. This is a small industry, after all.

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