When Don Varden founded International Bullion Exchange back in 2009, selling gold to retirement accounts was a tiny sliver of the precious metals industry.
Today, that niche has taken off. The number of competitors has risen and some have seen sales double in the last two years. Advertisements soliciting clients to invest in gold IRAs regularly appear on cable news channels.
Rapid growth could have been expected to lead to more competition. What Varden wasn’t expecting was that some of that competition would come from former contractors he says built their business with information gleaned from his operation and with clients taken from his roster.
The resulting fight highlights the increasing competitiveness of a growing industry. But it also illustrates how much of it still operates on the fringes of mainstream investment, with bit players juggling multiple small-time ventures in a landscape littered with accusations of theft and fraud.
Varden, who also operates two drug and alcohol rehab facilities in Malibu, formed Malibu’s IBX after his previous company was disciplined by a futures trading industry association for misleading sales solicitations. He is accusing former contractors of stealing business from him to fund their own outside ventures, including an unsigned band and a mobile app.
“We’ve seen a whole bunch of people coming out of the woodwork to get a piece of the action,” said Tyler Gallagher, chief executive of Burbank’s Regal Assets, a company that sells gold to IRAs. “A lot will be looking for a quick payout and an exit.”
Companies that sell precious metals to IRA accounts have grown recently, as dealers have learned to tap a new pool of customer assets. Gallagher said that the scare caused by the recession led many individual investors to park large amounts of cash in gold. But as cash purchases dried up, dealers began encouraging investors to roll over IRA accounts into gold. Many customers are baby boomers who have built up investable assets in their retirement accounts.
Varden declined to comment on his claims, made in a complaint filed in Los Angeles Superior Court. Lucas Asher, one of the former contractors named in Varden’s complaint, acknowledged that he worked for IBX but denied the accusations.
How it works
Self-directed IRAs have been legally allowed to hold many different kinds of assets, including real estate and precious metals, ever since Congress approved them in 1974. But it’s only recently that the option has caught on.
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