Liberty Dollar Update

[LPC]

More on the von Nuthouse front:

http://www.spokesman.com/stories/2011/a ... -focus-of/

Interesting item in the article:

Search warrants also were served at two Coeur d’Alene accounting firms involved in what a jury has now determined to be a counterfeiting operation.

I remember when NutHouse claimed that his operations were audited, and published the opinion of an accountant, it was one of the screwiest accounting opinions I had ever seen.

Perhaps it wasn't just the opinions that were screwy.

[The Observer]

Earlier, the question came up about how BVN was able to come up with $7 million for his stash. The article mentions that there may be as many as 250,000 customers involved in this scam. At that rate, the average purchase would be less than $30. Additionally, the article implies that BVN sold $20 million of this crap, meaning the average customer still would have spent less than $100 in purchases.

On the other hand, the customer count seems to be an estimate provided by BVN's lawyer, so that figure may be inflated for the purpose of trying to paint BVN as providing a much-needed service that was in high demand as opposed to counterfeiting. But if it is an approximate estimate, it is suprising how many people wenting swimming in the Liberty Dollar koolade.

My favorite line from the article:

Initially, the value of silver in the Liberty Dollars was less than their face value, and von NotHaus eagerly took Federal Reserve notes for their purchase. [empahsis mine]

Makes one wonder what BVN did with all those worthless FRNs.

[Pottapaug1938]

Earlier, the question came up about how BVN was able to come up with $7 million for his stash. The article mentions that there may be as many as 250,000 customers involved in this scam. At that rate, the average purchase would be less than $30. Additionally, the article implies that BVN sold $20 million of this crap, meaning the average customer still would have spent less than $100 in purchases.

On the other hand, the customer count seems to be an estimate provided by BVN's lawyer, so that figure may be inflated for the purpose of trying to paint BVN as providing a much-needed service that was in high demand as opposed to counterfeiting. But if it is an approximate estimate, it is suprising how many people wenting swimming in the Liberty Dollar koolade.

My favorite line from the article:

Initially, the value of silver in the Liberty Dollars was less than their face value, and von NotHaus eagerly took Federal Reserve notes for their purchase. [empahsis mine]

Makes one wonder what BVN did with all those worthless FRNs.

I'm sure that he burned them, just like he would any other paper trash.

[Gregg]

I was thinking he sent them to SMFKADMNSMVP to be 'redeemed' and got it all back in pre-'65 coins.

[Nikki]

More on the von Nuthouse front:

http://www.spokesman.com/stories/2011/a ... -focus-of/

Interesting item in the article:

Search warrants also were served at two Coeur d’Alene accounting firms involved in what a jury has now determined to be a counterfeiting operation.

I remember when NutHouse claimed that his operations were audited, and published the opinion of an accountant, it was one of the screwiest accounting opinions I had ever seen.

Perhaps it wasn't just the opinions that were screwy.

His sca<<< operation wasn't ever audited. The only thing the auditors ever examined was the relationship between the 'warehouse certificates' which he sold and the actual amount of metal on the books of the the various repositories.

IIRC, the auditors never did an actual physical examination of the metal, just a comparison of BVN's records to the records at the repositories.

[Number Six]

They're still selling on ebay, I even saw some of the bills being offered. As to the legality of this, one collector contacted the FBI and got this response in his call:

"I just got off the phone with a member of the FBI. I called the US Attorney's Office in Charlotte, North Carolina last week, and I guess they forwarded my contact information to the FBI.

Anyway, these were the takeaways from my phone call:

1) It's legal to possess the Liberty Dollar notes. The US government chose not to prosecute for distribution of the "warehouse receipts" (notes). Therefore, these are currently okay to own, as long as one does not use them directly in commerce. One can assume that the FBI didn't have proof of the receipts being used in commerce.

2) It's legal to possess the Liberty Dollar rounds, with caveat. If you own the coins as collectibles, then you're fine. The FBI was very clear on that. However, if you sell the rounds as collectibles, you are on very thin ice. Why? Well, with the caveat that he wasn't providing legal advice, the agent indicated that you don't know final intent. So, if a buyer decided to use the round as currency, you would be liable for distribution with the intent to defraud (US Title Code 18, Sec 491).

2a) The suggestion, again with the legal caveat of not providing advice, was made that a long list of disclaimers would need to be provided with each transaction. (Basically stating that the rounds were involved in a counterfeiting case and use of the rounds for any purpose other than collectible value would be illegal.)"


Read more: http://www.cointalk.com/showthread.php? ... z1IZxdEpQ5

[fortinbras]

The "bills" are, legally, warehouse receipts (and it says so on the bill) for the silver LD waiting in von NotHaus's vault. Originally, when von NotHaus begin this folly, under the name NORFED, you'd get issued the multi-colored paper warehouse receipt, and that - with the addition of some more (real) money - would get you the silver LD. Supposedly this was very scrupulous; there was at least one silver LD existing for each bit of paper. The paper bill said that it was good for 20 years from date of issue. Within that time whoever had the paper could send it in, plus some viggorish for shipping & handling, and get a silver LD. My calculation, several years ago, was that the price (in FRNs) of the paper receipt PLUS the s&h fees made the purchase price (in FRNs) twice the market price of pure silver. You'd probably have to wait more than 20 years, certainly more than a decade, to turn a profit at that rate.

Considering that the IRS has seized the LDs in von NotHaus's vaults, the paper receipts are worth no more than pretty paper. Some people are going to wish that Bernard von NotHaus had printed his bills on soft absorbent paper.

[notorial dissent]

More on the von Nuthouse front:

http://www.spokesman.com/stories/2011/a ... -focus-of/

Interesting item in the article:

Search warrants also were served at two Coeur d’Alene accounting firms involved in what a jury has now determined to be a counterfeiting operation.

I remember when NutHouse claimed that his operations were audited, and published the opinion of an accountant, it was one of the screwiest accounting opinions I had ever seen.

Perhaps it wasn't just the opinions that were screwy.

His sca<<< operation wasn't ever audited. The only thing the auditors ever examined was the relationship between the 'warehouse certificates' which he sold and the actual amount of metal on the books of the the various repositories.

IIRC, the auditors never did an actual physical examination of the metal, just a comparison of BVN's records to the records at the repositories.

I think that as they are now straight out calling it a counterfeiting operation it does not bode well for his suc****/customers, and the fact that they are paying the alleged "auditors" a visit doesn't bode well for them either unless they were very careful about what they contracted to do, and even then the appearance of impropriety does not look good. I will say this once again, that despite the FBI agent's guarded response about the warehouse receipts, based on what they look like, and certainly the intent, that they too really fall within the counterfeiting statutes as well, and I don't think that bodes well for the holders either. Basically they are just plain screwed at this point.

I still can't believe some of the figures coming out of this, I would like to see an actual accounting of what was found, just on scope alone this is pretty amazing. I never would have guessed he had that many customers, or that much invested in it.

[Pottapaug1938]

At last summer's American Numismatic Association convention in Boston, one of the competitive exhibits was what looked like a complete collection of Liberty Dollar... pieces of metal and paper. I was tempted to try to track down the exhibitor and find out whether he was a True Believer or just a collector; but if he had been the former I probably wouldn't have wanted to spend much time around him.

I wonder what that collection is worth now?

[Gregg]

If you search my posts, a long time ago I listed the inventory of what was seized and broke it down to what it was worth at the current rate for the metals listed. I'd just love to say the numbers were nowhere near what is being claimed now, but honestly I don't remember anymore than trying to get something posted from an excel spreadsheet to align on the forum, and the numbers are lost to my memory now. I may try in the next few days to find the post.

[Gregg]

At last summer's American Numismatic Association convention in Boston, one of the competitive exhibits was what looked like a complete collection of Liberty Dollar... pieces of metal and paper. I was tempted to try to track down the exhibitor and find out whether he was a True Believer or just a collector; but if he had been the former I probably wouldn't have wanted to spend much time around him.

I wonder what that collection is worth now?

A little more than 1/3 the face value of the coins?

[.]

Included on the forfeiture list are 8 tons of precious metals, including 168,599 silver Liberty Dollars in various denominations, an additional 1,000 pounds of silver bullion and 3,039 pounds of copper coins.

To get to 8 tons you have to call copper a precious metal and do a little rounding.

168,599 troy ounces is ~11,561 pounds. If the silver in the coins is .99 fine and the coins actually contain a full troy ounce of silver, then the coins have to weigh ~1% more than that, or ~11,678 pounds. Adding the silver bullion and the "precious" copper totals ~15,717 pounds or ~7.85 tons. Close enough for government work.

Hard to believe there wasn't a single ounce of gold around, but none is mentioned. Then again, VonNutBall's marks were probably mostly the type that wouldn't be able to scrape up the price of an ounce of gold.

What is funny is that thousands of marks dumb enough to buy the coins in the first place were also stupid enough to let VonNutBall "store" them. Even 3,000 one ounce coins in tubes would take up less than a cubic foot. Amazing idiocy.

[The Observer]

What is funny is that thousands of marks dumb enough to buy the coins in the first place were also stupid enough to let VonNutBall "store" them. Even 3,000 one ounce coins in tubes would take up less than a cubic foot. Amazing idiocy.

Which brings up this question in my mind: If a LDer had been smart enough to request his purchase be forwarded to him or her, would they have made a profit if they sold today (and let us presume that they bought $100 worth of LDs in 2008)? I am guessing not.

[.]

If they top-ticked silver at ~20.50 early in '08, they probably would have been buying the $50 version. If they bought at the low of the year ~8.80 he was probably peddling them the $20 version.

Silver today is ~39.25, so it could go either way depending on the timing of the purchase.

[notorial dissent]

It still boils down to the fact that when ever they bought the LD's, they paid at minimum twice the then going price for the silver, and so in order for them to have made a profit the actual price of silver would had to have more than doubled and in a very short time for them just to break even, and this isn't counting on the loss they had due to inflation for sitting holding something at negative equity for an extended period of time.

So to my way of thinking, it would have been hard for any of them to have actually made anything on the transactions at all, and at best they probably came out even, if you don't count inflation, and I suspect that most if not all of them lost, and now particularly the ones whose silver has been seized are at 100% loss.

The collectors, and speculators may make something off of them for novelty value, always provided the gov't doesn't decide they whole kit and kaboodle are contraband and illegal to own or sell, which could very well happen.

There serious coin collectors here can maybe tell me, but isn't it still illegal to have in your collection a counterfeit coin if you know it is?

[Pottapaug1938]

It still boils down to the fact that when ever they bought the LD's, they paid at minimum twice the then going price for the silver, and so in order for them to have made a profit the actual price of silver would had to have more than doubled and in a very short time for them just to break even, and this isn't counting on the loss they had due to inflation for sitting holding something at negative equity for an extended period of time.

So to my way of thinking, it would have been hard for any of them to have actually made anything on the transactions at all, and at best they probably came out even, if you don't count inflation, and I suspect that most if not all of them lost, and now particularly the ones whose silver has been seized are at 100% loss.

The collectors, and speculators may make something off of them for novelty value, always provided the gov't doesn't decide they whole kit and kaboodle are contraband and illegal to own or sell, which could very well happen.

There serious coin collectors here can maybe tell me, but isn't it still illegal to have in your collection a counterfeit coin if you know it is?

I do believe that it is; but I also know that there is somewhat of a gray market in counterfeits. I have quite a few of them in my collection; and part of the reason is that I find them fascinating -- some are first-rate fakes, and some are so poor that you can't even imagine them being accepted in an old-time waterfront saloon. The other reason is that I use them as educational tools, when I am teaching young collectors about counterfeits and want to show them how to spot one.

[Nikki]

One important thing to remember is that it's only the final, end purchaser (and holder) of a NORFED coin who is also holding the bag.

VonNutcake set up a tiered distribution system with what were, in effect, mid-layer resellers. These people bought the coins, etc, at a significant discount and then resold them at retail. The downside of being a reseller was that they were supposed to buy back (for FRNs) any coins returned to them from dissatisfied sucke<<<<< customers and merchants who accepted them.

However, there never was any requirement for them to repurchase at face value.

[Gregg]

Was it written on some NORFED written document that the mid level sellers had to buy back coins from MERCHANTS who had taken them? If so, that seems to me like a pretty good case that VNH intended them to be used as money, and that pretty much wipes out his entire defense.

[fortinbras]

Von NotHaus himself promised to refund, or buy back, his funny money .... for a shipping & handling fee; so nobody ever got all their money back. But that was also the gimmick that made his warehouse bank work.

Essentially, people trying to hide their money from the IRS, creditors, ex-wives, etc., would park their cash with NotHaus and receive, as a sort of claim ticket, his funny money, either paper or metal. Since the whole operation was wink-wink, these people would not count NORFED's paper or metal as "money" when asked by the IRS, et al. Afterward, whenever they need any of their cash, they'd send back the funny money, and NotHaus would send them the real money (probably in the form of a postal money order) - minus his s&h fee. Essentially his bite, ostensibly for shipping & handling, was his payoff for running his domestic Swiss bank.

A similar warehouse bank operation went on under the National Barter Assn some 25 or 30 years earlier, but the clients lost their cash when the bank "manager" - who kept his promise to leave no paperwork for the IRS to find - very inconsiderately died, taking with him the knowledge of who was entitled to what. He had apparently stashed all the money in a safe deposit box in a commercial bank, under his own name, so it was all inherited by his own family.

[The Observer]

And that is the inherent problem with warehouse banking. Since it is under the table and off the radar, there is no protection for the customer's deposits, which are vulnerable to embezzlement or loss to mismanagement, theft and disaster. Since there are no firm auditing controls in place, no governmental oversight and no standard banking procedures, the deposits are uninsurable and totally at risk. It is no wonder that all of these warehouse banking schemes result in loss to the depositors.