The alchemy of fraud: Investment scams in the precious-metals mining business
Particularly since the emergence of modern stock markets, investment frauds based on hyped or completely phony claims have been sufficient to cause concern. However those involving precious metals seem in a category by themselves. Partly no doubt that is because such schemes routinely promise fantastic returns; partly, too, it is because precious metals have a special lure based on myth, magic or even atavistic religious appeal which con artists exploit. However it is often difficult with precious metal mines to know precisely where over-enthusiasm by promoters ends and outright fraud against investors begins. Unlike with base metals, it is commercially feasible to mine precious ones at very low concentrations; while the speculative nature of most new mining ventures makes failure for legitimate reasons a frequent occurrence, helping to disguise or at least fudge the distinction between a business venture that went sour and an outright scam. Moreover the geology of sites can be tricky even for experts to read; assay results are far from conclusive in many instances; and the technologies employed are often changing with the result that what might have seemed an impossibility one day becomes at least arguable the next. All this combines with short memories and the lure of potentially very high returns to make investment in the precious metals sector as much today as in the past treacherous not just for novices but even for experienced investors. This paper examines the nature of such investment frauds in light of history, technology and geological uncertainty, and suggests reasons to expect no significant change in the foreseeable future.