Recently, the topic of how to store and buy bullion has come under scrutiny. Here are tips for safely storing and buying bullion and coins including depository dos and donts.
There used to be a time where the bullion world produced relatively few interesting news stories. However, things have changed. Drama from the bullion world has recently been leaking into the mainstream media.
Fraud Alleged
Robert Higgins is the owner and CEO of Argent Asset Group LLC and First State Depository Company LLC. The Commodity Futures Trading Commission, (CFTC), accused him and his company of fraud in relation to a multimillion dollar scheme involving many customers.
The civil lawsuit, filed in 2022, claimed Argent and First State Depository had, since 2014, operated as one enterprise under Higgins’ tutelage, and fraudulently solicited at least $7,000,000 from 200 customers through a silver leasing plan called the Maximus Program. The CFTC states that the Maximus Program was designed to pay customers who leased their silver to Argent. Customers were also told they would be covered by insurance and receive payments.
However, the suit asserts that the defendants misappropriated the customers’ assets and misled clients who attempted to transfer their holdings to other depositories and failed to provide the insurance coverage promised. Higgins, as the operator for Argent and First State Depository, is deemed at least partially responsible by CFTC. And that’s not all…
Private Safety Deposit Boxes Raidée
The West Coast was hit by another shocking news when U.S. In March 2021, FBI agents raided Private Vaults, a vault in Beverly Hills, California. The storefront safety deposit company had a system that allowed customers to rent boxes anonymously. This raised concerns from authorities that “only those who wish to hide their wealth from the DEA, IRS, or creditors would” anonymously rent boxes from U.S. In an affidavit, FBI agent Lynne Zelhart wrote that Private Vaults was the only company renting boxes anonymously.
The search was based on a thorough investigation of criminal evidence against U.S. Private Vaults pled guilty in 2022 to laundering drug money. The forfeitures were prompted by a warrant which did not mention that assets belonging to unidentified box renters would be seized. The FBI seized more than 86 million dollars in rare coins, gold and silver bullion and watches, jewelry and cremated remains.
“The government’s indiscriminate seizure of hundreds of safe-deposit boxes should give all Americans pause,” said attorney Robert Frommer, representing a class of approximately 400 private safe-deposit box renters challenging the government’s search and seizure of their property. “When you rent a private space like a safe-deposit box or a storage unit, that space is yours. The government broke into each apartment in the building, assuming that the landlord was dealing drugs. The Fourth Amendment means that the government shouldn’t be able to break into that space unless it has evidence that you did something wrong. If U.S. Private Vaults, it means all Americans should think twice before entrusting others with their possessions.”
COURTESY JOSHUA MCMORROW-HERNANDEZ;ADOBE STOCK / KARANDAEV
Tips On Safely Storing Coins & Bullion
“I don’t like private depositories, I never considered them safe, and I don’t recommend them,” said numismatic and bullion expert Scott A. Travers. “More and more people are stepping forward with missing coins, missing bullion and missing property,” warned Travers, who wants people to know there is a clear distinction between private depositories – which are essentially warehouses – and safety-deposit boxes at a bank. “That doesn’t mean there aren’t multiple depositories that are operated well and run by reputable people. But I strongly dislike depositories.”
Having heard too many horror stories from clients and colleagues, Travers takes a vigilant approach when storing any assets, even in one’s home. “When storing your stuff at home, use a UL-rated safe,” he advised. His favorite safes come from UL and are rated TXTL-60. These are explosion-resistant vaults that can withstand more than 5,000 lbs, can withstand an entire hour of almost every type of intrusion, and often can insure up to $10 million.
Storage Recommendations
Travers suggests spreading assets out, dividing them between safe-deposit box at a bank and home storage. “Maybe half stays at home and half goes in a bank safety-deposit box that is itself located within a vault.” Travers is also a strong proponent of insurance. “The right plan can offer protection to those who lose their goods in depositories or safe deposit boxes.”
No one solution fits all. “Think about location. Don’t consider any safety deposit boxes that might be located in the basement of a bank near a body of water, and think twice before choosing a bank in an area prone to forest fires or other natural disasters. Take into account the security and safety of your neighborhood. How safe is it in your home? Are you in a high-crime area or situated in proximity to anything that could pose risks to your goods?”
What If You Need a Bullion Depository
Some may find a depository necessary, such as in cases where they don’t feel safe keeping their bullion at home, have too many valuables to practically hold on their own, or if they frequently relocate – think military personnel and traveling businesspersons. There are also cases where a custodian is needed to protect silver or gold. For example, those who have bullion deposited in their individual retirement accounts (IRAs), which prohibits them from holding it at home.
“Depositories are a safe and secure method of storing precious metals for most people,” said bullion expert and former APMEX Vice President Michael Garofalo, noting home safes and bank safety-deposit boxes are good avenues but deal their risks. “A home safe is somewhat secure, but fire, floods or other natural disasters put your assets at risk. Anyone who sees your home safe will also assume it’s full of valuables otherwise why would you have it?”
Safe Deposit Boxes
There are also the increasing number of problems with safety-deposit box. “Many banks are eliminating safedeposit boxes and using the space for other more cost-effective ventures,” he said, adding, “If your local bank does still offer safe-deposit boxes, you have annual box rental fees of several hundred dollars or more. Additionally, banks have rules such as not storing cash in safe deposit boxes, and some do not want bullion stored in their boxes.”
Bullion Depositories
What next? “The other option is to store your precious metals in a depository built exactly for that purpose. The costs are usually minimal, between 50 and 150 basis points (half of 1% to 1.5%) of the value of the assets.” Garofalo added, “Generally speaking, the more precious metals that you own, the greater the advantage using a depository becomes.”
What is another reason for moving your bullion into an escrow account? Possible sales tax benefits. “If you find a depository in a sales-tax-free state, and you can buy precious metals and have them shipped directly to the depository, you can legally save on the costs by not taking possession of these items and having them shipped directly to the depository.” Garofalo advised, “check with your tax accountant to make certain that is appropriate and applicable to your situation.”
Everett Millman – an expert bullion dealer with Gainesville coins near Tampa in Florida – explained how the benefits of a depository increase for people who own large amounts of gold. “The more and more precious metal you own, the more it makes sense to choose offsite storage. This eliminates any risk of theft or liability at home. Every legitimate depository insures all assets under their care. So, removing the real risk of your residence being burglarized is one motivating factor.”
With precious metals IRAs the option to use a bullion storage facility is no longer an optional solution. “Vault storage is also a requirement if you want to include your metals in an IRA.”
Depository Storage Types
The range of services offered by depository institutions depends on the individual needs and preferences of each customer. Millman explains that depositories offer three types of bullion storage options, including allocated storage, unallocated and segregated. “With segregated storage, you receive the exact same assets you deposited back whenever you choose to withdraw your bullion. None of the deposits are pooled or co-mingled.” This is the ideal option for someone who wishes to store specific specimens in a depository and receive those same pieces back.
“With an allocated storage account, the depositor is only entitled to the same quantity and quality of metals when they take delivery. In that scenario, they are only guaranteed to receive equivalent pieces of bullion, such as getting a 10-ounce silver bar instead of the original deposit of 10 separate one-ounce silver coins – so long as the products are the same purity.” That arrangement works well for someone who is interested in transacting certain amounts of metal and is not tied to owning specific coins, medals or bars.
“Even worse is a third possible storage option, which is an unallocated account wherein your claim on the metals deposited is given less priority than the depository’s claim of custody. In other words, your unallocated assets could be liquidated if the company goes bankrupt.”
Doing Due Diligence
When shopping for the best bullion storage, there are several factors to take into consideration. “The biggest factors in finding the right depository are a reputation for trust and a long track record of being in business,” said Millman, who was careful to mention that the involvement of any third-party storage firm entails some degree of unavoidable risk.
“Carefully read the entire storage agreement before signing. Be sure to understand all the details of the contract, such as the amount and frequency of the storage fees. The storage contract should also indicate if the assets will be segregated, allocated or unallocated.”
Millman cautioned against companies that make tempting, but false claims. “Any storage facility that advertises itself as a tax shelter, or a way to shield an investor’s assets from being reported to the IRS is a major red flag.”
Garofalo urged those who are looking for a depositories to ask about the security and technology used to protect assets. “Don’t expect them to tell you all their secrets, but most depositories offer images of three-foot-thick steel doors protected by great security technology – you should ask about that.” Other questions to ask include the cost to withdraw assets. “Some depositories have costs that are steep, as they don’t want you to withdraw assets too often.”
Check the Better Business Bureau to see if there have been any complaints lodged. “Depositories should have great reputations, but remember, you can’t please everyone all the time.”
This article is about Store your coins in a coin collection box COINage magazine has previously published this article. To subscribe Click here to learn more. Article by Mike Garofalo.
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