It turned out to be a scam. Investors are SOL.
This is only a $24M fraud. It’s small compared to the major PM funds.
The Polish government banking regulator did put Amber Gold on a “potential fraud list”. That’s better than regulators in the USA. In the USA, an investigation is typically kept secret until the indictment
I watch American Greed on the Communism Channel (CNBC). It’s interesting to see how the Ponzi scammers operate. They are very good at emotionally intimidating people. Most of the time, the Ponzi isn’t caught until the scammer runs out of money. Sometimes, police do preemptively shut down a scam. Even in those cases, I’m always wondering why the police take their time. If they suspect it’s a scam, why let it keep operating for months during the investigation? They could have prevented losses by some investors.
That’s the big problem with the State financial system. There’s nothing preventing dishonest executives from stealing customer money. The regulators can’t prevent banksters from stealing customer accounts. If the theft is large enough, there isn’t even a credible threat of prison for the ringleaders. Only small fry like Peregrine/Wasendorf go to prison, while big scammers like Corzine get away with it.
There’s another amusing bit regarding Ponzis on American Greed. When the scammer runs out of money, he frequently turns himself in to police! Paradoxically, the State protects criminals. The State prevents a Ponzi scammer’s victims from getting real justice for themselves. Instead, the scammer is placed in prison. Really, the scammer should be locked in a room with his victims, and the police ignore whatever happens afterwards. Bernard Madoff is safer in prison, than in public where someone might take out their frustration on him.
In a free market justice system, there would be a concept of weregeld. If you murder someone, the victim’s relatives have a choice of either accpeting a fine, or murdering the criminal. That also would apply to Ponzis. If the debt is greater than the weregeld fine, then the victims should be allowed to execute the criminal. Why should I pay for the cost of keeping Bernard Madoff in prison, via taxes? Why not have a pay-per-view execution, with the money going to the victims?
Also, State regulators protect scammers. Investors figure “If this was a fraud, then State police would have shut it down!” Bernard Madoff “passed” several SEC audits, using his connections to escape when people started suspecting him. He then claimed “I passed an SEC audit. Therefore, my investment fund is legitimate!” All people involved in a scam should be partially responsible, including negligent State regulators. In a really free market, an auditor would have personal liability, if he signed off on something that turned out to be a fraud.
If you’re the manager of a PM fund, customer assets are a tempting theft target. Even though the fund claims to be full reserve, nothing prevents the fund manager from lying. It’s the classic fractional reserve banking scam. As long as all fundholders don’t simultaneously redeem their shares, the theft is undetected. As long as there are more new investors than redemptions, the scam can continue indefinitely, just like any Ponzi.
If you read the fine print of the GLD/SLV prospectus, the fund manager can lend out gold to short sellers. If there’s a default, shareholders get stuck with the loss. (Someones, trolls give me a hard time about that statement. If you read the “subcustodians” clause of the prospectus, that allows fancy tricks with the fund shareholders’ metal) PHYS and PSLV claim to have full reserves. However, if the fund manager lies or commits fraud, shareholders are still stuck. Just because a fund is audited, doesn’t mean it isn’t a fraud. Enron/Lehman/Healthsouth/Worldcom/MFG/Peregrine were all audited.
The actual return of GLD is the price of gold minus the management fee of approximately 0.5%. When you add the default risk to GLD, it’s actually a much worse investment!
Sometime in the next 10-20 years, there will be a default one of the big PM funds. The price of physical may skyrocket, when people redeem their shares and buy physical. On the other hand, those shares may not be worth anything when investors try to redeem them!
Unfortunately, there literally is no safe investment. If you invest in the State financial system, you can be robbed. You’ll be robbed by inflation, management fees, hidden fees, or outright theft. If you hide metal in your home, you can also be robbed. Whenever you buy gold and silver from a State dealer, your ID is recorded and that information can be leaked or used later. With physical metal, you can be robbed by ordinary criminals. You can be robbed by criminals wearing badges and uniforms, as they say “Only a criminal would hide gold and silver in his home!” There literally is no safe place to keep your savings.