Due to the market’s stability, gold-backed investments are popular among safe-minded investors. Unfortunately, that doesn’t mean any type of gold investment is safe – from fake bullion to phony financial firms, there are a number of scams that try to take advantage of the popularity of gold buying. Case in point: the trial of Southern Trust Metals and Loreley Overseas Corp. These companies, both run by Robert Escobio, were running a precious metals investment scheme that was found to be fraudulent this year.
On its face, the scheme sounds legitimate: Southern Trust was a precious metals trading firm that offered financing to purchase physical bullion held in depositories in London and Hong Kong. The firm solicited customers via telephone for its financed transactions, telling the customers that it would sell the bullion at a profit.
In reality, Southern Trust had no proof of ownership whatsoever for the bullion it was selling. Customer accounts were transferred to Loreley Overseas Corp., then through accounts in the U.K. The scheme ran from about July 2011 through May 2013 (during which demand was high and gold prices were booming) and collected more than $2.6 million from duped investors.
Even though the scheme ran years ago, there weren’t any repercussions until this year, when the U.S. Commodity Futures Trading Commission announced in September that Escobio and his companies were prohibited from commodity trading and ordered to pay more than $2.1 million in restitution and penalties.
So as a PSA to our clients and blog readers, don’t jump into an investment “opportunity” without doing thorough research – no matter how hot gold prices are, or how pushy the other party is.