Scam Artists Using Self-Directed IRAs to Mask Fraud

Scam artists, forever on the lookout for new ways to entice investors, are using self-directed IRAs to increase the appeal of their fraudulent schemes.  State securities regulators have investigated numerous cases where a self-directed IRA was used in an attempt to lend credibility to a bogus venture. Fraud promoters pushing a Ponzi scheme or other investment fraud can misrepresent the responsibilities of self-directed IRA custodians to deceive investors into believing that their investments are legitimate or protected against losses.  While a scam artist may suggest that self-directed IRA custodians analyze and validate investments, those custodians only hold the assets in a self-directed IRA and generally do not evaluate the quality or legitimacy of any investment.

Fraudsters also exploit the tax-deferred characteristics of self-directed IRAs, and know that the financial penalty for early withdrawal may cause investors to be more passive or to keep funds in a fraudulent scheme longer than those who invest through other means. Self-directed IRAs also allow investors to hold alternative investments such as real estate, mortgages, tax liens, precious metals, and private placement securities; financial and other information necessary to make a prudent investment decision may not be as readily available for these alternative investments. While self-directed IRAs can be a legitimate way to hold retirement assets, investors should be mindful of potential fraudulent schemes when considering investments for their self-directed IRA.  Custodians and trustees of self-directed IRAs may have limited duties to investors, and generally will not evaluate the quality or legitimacy of an investment or its promoters.

Department Contacts

Enforcement Contact (Kelly)

Kelly Mathias

Supervisor Investigations & Examinations
600 East Boulevard Avenue State Capitol, 5th Floor
Bismarck, ND 58505-0510
Phone:
(701) 328-2929
Toll Free:
(800) 297-5124
Fax:
(701) 328-0149
Enforcement Contact (Doug)

Doug Smith

Investigator
600 East Boulevard Avenue State Capitol, 5th Floor
Bismarck, ND 58505-0510
Phone:
(701) 328-2926
Toll Free:
(800) 297-5124
Fax:
(701) 328-0148
Enforcement Contact (Rachel)

Rachel Rice

Investigator
Grafton Satellite Office
701 W. 6th Street, #312
Grafton , ND 58237
Phone:
(701) 352-4592
Fax:
(701) 328-0126
Email:
Enforcement Contact (Michael)

Michael F. Daley

Attorney/Deputy Commissioner
600 East Boulevard Avenue State Capitol, 5th Floor
Bismarck, ND 58505-0510
Phone:
(701) 328-4701
Toll Free:
(800) 297-5124
Fax:
(701) 328-0127