The New York State Attorney General’s office issued a press release last week regarding a recent lawsuit filed against Lear Capital, a well-known California gold and silver dealer.
According to court documents, the Attorney General is filing the lawsuit after over 1,000 consumers allegedly complained about Lear’s sales practices. The official legal complaint against Lear alleges that investors were “persuad[ed] … through false and misleading statements to invest in precious metals” while the company charged investors with hidden fees that were well above the market price of common metals.
Additionally, the Attorney General’s complaint alleges that Lear targeted many elderly investors in the state. The lawsuit alleges that investors were charged up to 33% in hidden commission fees on over $43 million in sales since 2014. Based on its findings, the Attorney General seeks to recover $10 million from Lear Capital.
In its response, Lear denies all allegations and states that it fully discloses investment information to its clients. Seth Pierce, Lear’s general counsel, states that “We look forward to responding to the New York Attorney General’s unfounded allegations in court.”
In this post, we are not commenting on the particular situation at hand with the NY AG or Lear Capital. Instead, we are making sure that consumers are fully aware that such sales practices do occur in the marketplace. We would like to use this news as an opportunity to educate consumers on the potential risks involved in the precious metals market.
As economic uncertainty rises, many people are looking to alternative investments to protect themselves against market fluctuations. Precious metals such as gold and silver are often touted as a viable strategy against market volatility and/or downturns. Over the past two years, gold prices have risen from a low point of nearly $1,400 per ounce to an all-time high of over $2,000 per ounce. Similarly, silver has risen even higher, from a low of nearly $13 per ounce to as much as $27 per ounce.
As the metals market continues to heat up, many companies are heavily promoting opportunities for investors to own precious metals for their investment portfolios. However, not all companies are as straightforward and honest as we would hope. For instance, some companies and individuals increase the price well above the market price that the average investor should pay. This is problematic because some bad actors are taking advantage of economic uncertainty to exploit investors’ market fears. This is not good business, and it should be avoided at all costs.
Not only do some dealers increase prices unfairly, but they also pray on individuals through high-pressure sales calls. Trained salespeople employ tactics that instill fear in the minds of potential investors, which leads to a number of issues for investors. Even celebrities have endorsed certain precious metal companies to give the impression that this is a “safe bet.”
With any investment, investors must do their homework before taking advice from those that have an interest in selling a product. While a salesperson or celebrity may, in fact, be knowledgeable about a particular investment or product, they likely do not have your best interests at heart. This reality does not lead to a rational, unbiased investment decision.
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For more information on additional risks and warnings on precious metals, please see our in-depth blog post here. If you suspect any fraud or wrongdoing from such firms, please contact us today for a confidential, no-cost consultation at 239-319-4434. Our securities attorneys are ready to serve you today.