Massachusetts has threatened to sue a coin seller for allegedly selling coins it shouldn’t have, potentially voiding thousands of sale contracts between Massachusetts residents and the site Metals.com.
The sites, based in Orange County, California, solicit real-money sales of rare coins, often to seniors with retirement incomes. Critics allege Metals.com is a pyramid scheme that steals money from loyal customers and distributes it to new customers through rent-seeking mechanisms to pay the top performers in the network.
The state argued in a court filing yesterday (Dec. 6) that the website misrepresented its service, telling customers they would be paid for sorting through purchases, and that deals would be “deal-of-the-day” quality. But they actually got the same trading software and services available to new customers, and customers complained that their purchase costs were often inflated.
Metals.com did not respond to a request for comment.
The state says it mailed a letter to the company warning them that they could face criminal prosecution if they continued selling the coins they advertised. The company, which settled and agreed to change its practices in 2012, was on the brink of filing for bankruptcy before doing so in September, according to The Boston Globe.
In its court filing, Massachusetts attorney general Maura Healey also cited evidence of “price inflation” of coin prices and trading within the network, suggesting it makes profits off the customers’ inability to accurately forecast the value of the coins they buy. As a result, he says, buyers may need to re-pay or sell the coins, which they don’t normally do.
In addition to refusing to correct the misrepresentations, the company violated the state’s “swipe and take” law, which prohibits contracts that require a person to either pay the price they paid for goods or reimburse the goods after the goods are delivered. The state’s argument hinges on a Massachusetts law that defines a card that pays the customer for a given coin as being a substitute for the “commodity”—an example being a bus ticket or the price for a postage stamp. Under this interpretation, cards can’t be paid for using the coin “payments” system because the coin is being substituted for the “commodity.”