By Charles Morgan and Hubert Walker for CoinWeek Notes …..
There are many reputable and knowledgeable firms that combine to sell billions of dollars of rare coins and modern numismatic coins in the rare coin industry–you’ll find ads for many of them on CoinWeek. But outside of these honest actors are individuals who seek to fool unsuspecting collectors.
In the 12 years that we’ve covered the rare coin market, we’ve seen all manner of scams. Here are three that you should avoid.
Scam #1: Counterfeit Collectible Coins
E-commerce has made the manufacture and import of counterfeit coins much more prevalent than at any time in the hobby’s history. These fakes typically originate in China, where they are manufactured on an industrial basis and imported into the United States, where they get through customs and are marketed to unsuspecting buyers. The scourge of these fakes has cost the leading grading services millions of dollars as they work to improve the anti-counterfeiting measures on their slabs. CoinWeek contributor Jack Young often writes about these fakes, which are so deceptive that they occasionally fool professional numismatists.
The easiest way to avoid these fakes is by purchasing your coins only through a reputable coin dealer. If the coin is graded, check its certification number against the verification tools provided by the grading service. If the coin has an auction history, check the appearance of the coin against known photographs of the coin from its prior sales. These efforts will not eliminate the possibility that you are buying a fake, but you greatly reduce your exposure.
Another thing that you must consider is that sellers who market counterfeit coins risk legal exposure by doing so in the open. Coin dealers who are members of the American Numismatic Association (ANA) or the Professional Numismatists Guild (PNG) adhere to codes of ethics and neither of these organizations would tolerate a member who knowingly sold fakes.
The same can’t be said by social media companies like Facebook, which allow anybody to market their goods and services without a background check. While reputable dealers may sell on that social media platform, we advise against purchasing any coin off of a Facebook ad unless it is from an established business that you can verify is a member of one of the aforementioned national organizations.
Scam #2: High-Pressure Sales Tactics
Reputable dealers nurture lasting relationships with clients and often are essential partners in building collections. The most important collections in the history of numismatics were collaborations between the hobby’s most affluent collectors and the industry’s most knowledgeable dealers.
One doesn’t have to be a Rockefeller to afford quality representation from a reputable coin dealer. In fact, most dealers prefer to work with collectors who are serious about building collections, even if the coins are not necessarily expensive. Unfortunately, not every interaction that a collector might have with someone selling coins is going to be positive, and collectors should be leery of purchasing coins from dealers that they don’t know – especially if that dealer is soliciting a sale over email, social media, or the phone.
All too frequently, these solicitations are either outright scams or scummy in the sense that the coins being offered are overpriced or overgraded. A few years ago, we interviewed a former telemarketer who admitted that his company would often cold call leads and offer them overpriced graded coins. This is quite common, and those taken in by the offer should be thankful they received any coins at all. Some phone scammers don’t even have coins to begin with.
While we would never buy coins from a telephone solicitation as a rule, there are reputable companies that do this. Instead of just saying “yes” to the offer, ask the person calling if they can refer you to their company’s website. Do not be taken in by offers of getting a better deal over the phone or that the coin is going to sell out if you don’t act now. Almost nothing that you get offered over the phone, especially modern coins, are so scarce that you can’t find them at other reputable sellers.
Also, be wary of dealers who make dubious valuation claims by pulling random online ask prices. Typically, you will see this with coin television shows. The way the bit works is that the seller will offer a coin or set of coins and then show printouts from various eBay listings. An eBay listing proves absolutely nothing about the value of a coin. Anybody can ask any price for anything they list on the site, and even the TV seller can seed inflated ask prices or sold prices for coins on eBay. Occasionally, these shows will offer interesting products for sale, but for the ordinary stuff, you can find cheaper alternatives.
Another tactic is fear-based selling. Usually, you see this with precious metals products, and the way dealers use this to sell products is by appealing to one’s natural mistrust of the government and its economic policies. If you’ve ever seen a pitch for gold or silver that also mentions runaway inflation, then you’ve encountered fear-based selling. Fear-based selling isn’t a scam on its own, but when it’s used to make the buyer behave in ways that they ordinarily wouldn’t, it becomes predatory. One way a dishonest dealer might exploit fear to influence behavior is by converting sales of lower-price bullion coins into sales of overpriced numismatic products.
To understand how this is possible, one must understand that the United States has a spotty history of respecting a buyer’s freedom to own gold bullion. In 1933, at the height of the Great Depression, the Roosevelt Administration issued an executive order that recalled all gold coins. From this point forward, it became unlawful for Americans to hoard gold bullion, although it created a carveout for coin collecting and the ownership of jewelry and other non-monetary forms of gold. These restrictions were eliminated during the Nixon Administration, and the United States Mint has produced legal tender gold bullion coins for sale to investors and collectors since 1986. Sellers know this but sometimes drive sales to more profitable coins by suggesting that the government may once again seize gold bullion and that smart investors will buy rare coins instead.
Of course, it’s not knowable what the government will do in the future, but it’s highly unlikely that gold would again be seized as the dollar is no longer on the gold standard. Besides, if gold were seized, what’s to stop the government from taking everything?
Scam #3: Phony-Baloney Toners and Varieties
Collectors love toned coins, rare varieties, and Mint errors – which is why these numismatic items sell for higher premiums over similar coins struck with the same design or date.
Toning (or tarnish, depending on where you sit on the issue of surface corrosion) is a naturally occurring phenomenon that impacts different coins in different ways. For bronze or copper coins, toning changes the color from a fiery orange to a dull brown, dark chocolate, or even blue. For silver coins, like the gratuitously offensive toned American Silver Eagle pictured above, it’s not unusual for a coin that has been improperly stored for a long period of time to develop a champagne or dull gold tarnish. Other colors are also possible, which is why you occasionally encounter Silver Eagles with attractive rainbow coloration. This type of toning usually occurs when the coin has been stored in proximity to sulfur-rich paper-based packaging materials.
Unfortunately, rainbow toning can be faked with just a basic understanding of coin chemistry. When people add toning to coins to sell them for more money, we call this coin doctoring, and the coins themselves are described as being “artificially toned”. Coins with artificial toning are relatively easy to spot. The coloration of artificially toned coins is too vivid, too uniform, and appears to float on the coin’s surface. If submitted to a leading third-party grading service, most of these artificially toned coins will be flagged and given details grades.
On eBay, however, raw coins with artificial toning are quite common, especially coins of more recent mintage. These may be vibrant and colorful, but numismatically, the coins are ruined and should be avoided. Buy toned coins only if they have been certified and given a numerical grade. Then and only then are these coins worth a premium.
As for varieties and errors, it is important to know how coins are made before diving too deeply into the field.
Numismatists use the word “variety”, or “die variety”, to denote a coin that has been struck with certain characteristics that may differ from other coins struck that same year. Examples of this are the 1909 V.D.B. Lincoln Cent and the 1909 No V.D.B. Lincoln Cent. For this coin, the United States Mint initially issued coins that included the designer’s initials at the bottom of the reverse. After receiving complaints, the Treasury Department ordered the Mint to remove the initials on subsequent strikings. The Mint complied and prepared dies for use that did not have this feature. Less obvious varieties may relate to minute details such as doubled dies, repunched dates, or repunched mintmarks.
An error is a coin that was struck in a manner that does not comply with the Mint’s official standards or tolerances. These pieces are occasionally released among the billions of coins issued into circulation, but in the past, some dramatic errors have gotten out of the Mint through other means.
To an experienced collector, phony error coins pose little threat. To the earnest beginner, however, inexperienced or unethical sellers often pass ordinary coins off as if they are errors. In the image above, an ordinary Washington Quarter was listed as an error because of an incorrect spelling of the word “GOD”. A collector with a good understanding of how modern coins are made would know that the Mint utilizes advanced computer software to design its coins and that accidental misspellings on certain dies and coins do not happen. Furthermore, the serif on the letter “G” is present on the coin in the image, despite the seller’s interpretation that the letter “C” is present instead.
A little bit of knowledge goes a long way for Mint error collectors, and we recommend those interested to consider a membership in the Combined Organization of Numismatic Error Collectors of America (CONECA for short). Not only does this organization publish extensive research about Mint errors, but the level of expertise available to beginner collectors is not available anywhere else in the hobby.
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These are just a few of the many potential pitfalls that await the beginner collector, and most veteran collectors will tell you that they’ve fallen for similar coin scams along the way in their collecting journey. So long as you stay mindful of your purchases and don’t get caught up in the hype, you will find coin collecting to be fun, challenging, and educational.
Till next time, happy collecting!
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