Silver Prices: Market Loses $90 Million To Ponzi Scheme (SLV, AGQ, ZSL, PSLV, GLD)
Diane Alter: Silver prices dipped last week after U.S. Federal Reserve Chairman Ben Bernanke failed to confirm that more economic stimulus is on the way. Silver prices hovered below $29 an ounce Friday.
Meanwhile, millions of dollars that would have been invested in physical silver it turns out were instead held in a $90 million Ponzi scheme orchestrated in South Carolina.
The Commodity Futures Trading Commission (CFTC) reported Thursday it charged Ronnie Gene Wilson and Atlantic Bullion & Coin, Inc., both of Easley, S.C., with offering contracts on silver sales, but never actually purchasing any metal.
The CTFC maintains in a filing Thursday in U.S. District Court in South Carolina that Wilson and Atlantic Bullion & Coin violated the Commodity Exchange Act and CFTC regulations by operated a Ponzi scheme dating back over a decade and continuing through Feb. 29 of this year.
Wilson and Atlantic Bullion & Coin fraudulently obtained at least $90.1 million from some 945 investors, the CTFC alleges.
The CFTC received jurisdiction over the entities from Aug. 15, 2011, to Feb. 29. During that time, Wilson and Atlantic Bullion & Co are accused of deceptively obtaining at least $11.53 million from at least 237 investors in 16 states under contracts of sales to buy silver, without buying or delivering the white metal.
According to the CFTC charges, Wilson and Atlantic Bullion issued fake account statements to unknowing investors who believed they had invested in silver.
The CFTC is after compensation for scammed investors, a return of illegal gains, civil monetary penalties, trading and registration bars, and permanent injunctions against further violations of the federal commodities laws if successful in its suit.
However you choose to buy physical silver, gold or other precious metals, the most important rule is to deal only with reputable dealers who have proven experience in the business and clearly stated policies and warranties – especially if you’re purchasing by phone or online.
Silver Prices: The Effect of Manipulation
While Ponzi schemes can steal millions of investing dollars that would otherwise be circulating in the silver market, a more serious and complex trend is manipulation in the silver futures market.
In April, Money Morning’s Global Resources Specialist Peter Krauth wrote a piece addressing the matter, “The Who, How and Why Behind Silver Manipulation.”
In an interview with silver guru Ted Butler of Butler Research, Krauth discussed how suspicious activity, demand, price manipulation, short selling, physical and paper silver all affect the silver prices.
Butler maintains that “the manipulation in silver has caused silver to be priced much cheaper than it would be otherwise,” making it a better buy.
“The silver manipulation will end one day as all manipulations throughout history have ended. Given the nature of these things, the price of silver will be much higher when the manipulation ends. Therefore, the manipulation is giving silver investors a double barreled bonanza. One, a cheap price to buy at than would otherwise be the case, and two, a much higher price to sell at once the manipulation is ended. That circumstance does not exist in any in any other investment, to my knowledge,” Butler said.
“The long play” in silver, Butler maintains, “is the best play.”
Related ETFs: ProShares Ultra Silver (NYSEARCA:AGQ), Sprott Physical Silver Trust ETF (NYSEARCA:PSLV), ProShares UltraShort Silver (NYSEARCA:ZSL), iShares Silver Trust (NYSEARCA:SLV), SPDR Gold Trust (NYSEARCA:GLD).
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