Precious Metal Investors Have Lost Millions! Don’t Fall Victim to Depository Scams.

Craig Rhyne used the $19,000 he received from a settlement after he lost his leg in a car crash to open a precious metals business in Seattle, Washington in 1974. He quickly found success as the price of gold soared.

A few years later, he relocated Rhyne Precious Metals to a gleaming office building in downtown Seattle. He became a prominent figure in the precious metals industry in the Northwest region, and he started a trade group, the Washington Coin and Bullion Association. In 1985, he became a founding board member of the Industry Council for Tangible Assets (now the National Coin & Bullion Association). He operated his business for over 20 years and had a flawless reputation.

But he harbored a secret.

In the 1980s when the gold market softened, it had become difficult to make ends meet. By the late '80s, he began defrauding customers. When they paid him for precious metals, he used that money either to buy metals for other customers or to pay overhead expenses. Because many of Rhyne’s customers stored their metals in his own vaults, the deception went undiscovered for years. By the mid ‘90s, he was $3.6million in arrears. The deficit had grown too large for him to manage. In 1996, he turned himself into the US Attorneys’ office, detailing his financial irregularities.

"I thought I could pull my business out and pay off all my debts," Rhyne said, as he wept in court. "I was wrong."

There are no salacious details and by all accounts Rhyne was contrite. But because of his status and reputation in the industry, it was a major blow to the bullion community when this scheme came to light. Rhyne appeared to be one of the best in the business. He was sentenced to 33 months in prison, followed by probation and making restitution.

Why mention a 30-year-old crime? There’s one particularly interesting element to this story. Rhyne started his business in 1974. It was on the very last day of that year, December 31, 1974, that all restrictions on private ownership of gold were eliminated under Public Law 93-373. When gold bullion investing began, Rhyne’s business began. From the very earliest stages of precious metal investment, we see evidence of a problem: the depository.

A depository is a facility or an institution that stores assets on your behalf. Some investors use depositories simply for convenience and safety. They don’t want to worry about insurance, security and shipping and would rather pay a modest fee to someone who provides this service. In fact, many of Rhyne’s victims said they felt it would be easier and more convenient for them to keep metals in his vault. More often, however, depositories are used because they are required. For example, precious metals held in a retirement account (self-directed IRA) must be stored in a depository. Last, bullion used as collateral for a loan must be stored in a depository where it will be held until a release is provided by the lender. Many businesses use depositories because their bullion inventory is collateralized.

The problem with depositories is obvious enough. Investors do not have direct control over their holdings. They expose themselves to third party risks. The lack of transparency of depositories almost seems to invite misdeeds.

Craig Rhyne eventually re-emerged in the precious metals business, albeit at a lower profile, and has serviced customers without incident for decades. If Rhyne appears redeemed, the depository is not.

Robert L. Higgins, owned and operated First State Depository, a precious metals depository located in Wilmington, Delaware. First State Depository held over $100 million in customer assets, primarily in the form of gold and silver bars and coins. Higgins also ran Argent Asset Group, a precious metal brokerage.

In 2012, his business began to have financial trouble. Higgins diverted customer assets to pay debts and personal expenses. The misappropriation continued for a period of 10 years. During that time, many in the business knew Higgins to be “slow pay,” but he seemed to keep operating, finding new backers. The structure of his depository business hid the true nature of his financial condition.

Customer complaints began to pile up after Higgins failed to deliver metals. When Federal investigators entered his depository, they discovered that instead of precious metals sitting on shelves, there were pieces of paper, IOU slips. In total, $58 million worth of customer assets had been stolen.

Industry sources generally agree that this is the largest theft from a precious metals depository in US history. In October 2024, Higgins was convicted of mail, wire and tax fraud. He is currently detained, awaiting sentencing, and faces a maximum penalty of 20 years on the wire and mail fraud charges and 5 years on each tax fraud charge.

While the First State Depository saga was winding down, details of a new depository scandal were emerging. In April 2024, Oxford Gold Group shut the doors of its office on Wilshire Boulevard in Beverly Hills. Oxford serviced retirement account investment.

Buying precious metals in retirement accounts (IRA) involve several parties. A custodian holds the money. When requested by the investor, the custodian sends funds to a precious metal dealer to buy precious metal coins or bars. The metals are then sent to a depository for storage.

Oxford Gold Group recommended Equity Trust as IRA custodian, which required that metals be stored at one of the top five depositories in the country: A-Mark Global Logistics, Loomis Intl (AMGL), Delaware Depository (DDSC), International Depository Services (IDS), and Brink’s.

In February 2024, Equity Trust began sending letters to customers that it was no longer working with Oxford Gold Group. Customers could see that Equity Trust had debited money from their accounts and sent it to Oxford to purchase bullion, as requested. When the customers contacted the depositories, however, they learned that Oxford had never sent any metals. The depositories had no accounts in their name or no record of the transaction. Instead, their retirement funds were simply gone.

In August 2024, a class action lawsuit was filed against Oxford Gold Group, its Chief Executive Pedram Granfar, and its Chief Financial Officer Jonathan Adler. The FBI is now investigating.

It’s unclear how large the Oxford Gold Group fraud will be. By all accounts, this appears to be a straight fraud, but one that exploited the depository and lack of transparency. Fortunately, this is a risk that most precious metals investors can easily avoid.  

Investors should accept physical delivery and store gold themselves. That’s one of the primary benefits of precious metal investment. Metals are a tangible asset that investors can hold themselves. In fact, most conventional investments rely on third parties such as banks, credit unions, brokerage houses and even financial technology intermediaries. They may go bankrupt, enter default or fall into some form on non-compliance. Holding physical gold personally eliminates these risks. Precious metals may be the only investments type that allows this level of control. Any investor seeking to diversify their holdings with precious metals should take advantage of the additional step of self-storage for the highest level of security and peace of mind.