Counterfeits, illegal copies and doctored coins are flooding the US coin market. Most come from China. Some estimates put the number of such coins at 10,000 per month. Proxibid works to resolve such issues when a buyer learns a purchased coin is a fake. But there are steps you can take to protect your business and retain your customers, including the creation of a consignor contract that specifies sellers are responsible for counterfeit coins.
We strongly recommend that all auctioneers create a consignment agreement that specifically states that sellers are responsible for all counterfeit coins returned for reimbursement.
Several auction houses already have such contracts. Here is such a clause from Leonard Auctions:
REPRESENTATION OF GENUINENESS. Consignor represents and warrants each item to be genuine. Consignor agrees that any item found to be non-genuine withint 30 days of the auction date, will be returned to the Consignor, and upon return, Consignor will pay Leonard Auction, Inc., the net proceeds of the returned item.
We applaud this, but also point out that sometimes it takes 2-3 months to prove that a coin is counterfeit. For instance, we just purchased one that was so skillfully done that we had to send it to NGC for authentication because we would not have been able to prove it was a contemporary copy of an 1869 coin. That cost us $70 in NGC fees, but it was worth the money.
In the past year we returned seven counterfeit coins to a half dozen auctioneers. All provided reimbursement even though we had agreed to the standard auctioneer contract:
All property is sold “AS IS,” and ALL SALES ARE FINAL. It is the Bidder’s responsibility to determine condition, age, genuineness, value or any other determinative factor. Any grades given are the consigners opinion and are not guaranteed. The Auctioneer will not be responsible for any errors or omissions in the description of the merchandise unless it is a material and intentional misrepresentation of the item itself. Bidders agree that they may not return any item they purchase.
That iron-clad contract may no longer hold ethically or legally in the wake of these chilling facts:
- China is exporting to America tens of thousands of counterfeit U.S. coins each month.
- Other counterfeit coins stored for decades in bank boxes are consigned regularly in estate auctions.
- Unscrupulous sellers consign altered or fake coins, targeting online auction companies with poor photography so as to hide defects.
- Unprincipled sellers put their inferior coins in holders with intentionally misleading labels, counting on auctioneers to quote retail prices as listed in numismatic books and guides.
Auctioneers who sell coins should read appropriate sections of title 18, chapter 25 of the federal code, “Counterfeiting and Forgery.”
Section 486 of that chapter states: “Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.”
Section 473 of that chapter states: “Whoever buys, sells, exchanges, transfers, receives, or delivers any false, forged, counterfeited, or altered obligation or other security of the United States, with the intent that the same be passed, published, or used as true and genuine, shall be fined under this title or imprisoned not more than 20 years, or both.”
There are other laws, too, such as the U.S. Hobby Act of the Federal Trade Commission, which reads, in part:
Imitation numismatic item means an item which purports to be, but in fact is not, an original numismatic item or which is a reproduction, copy, or counterfeit of an original numismatic item. Such term includes an original numismatic item which has been altered or modified in such a manner that it could reasonably purport to be an original numismatic item other than the one which was altered or modified.
A doctored coin falls under this category. According to the Professional Numismatists Guild, doctoring is defined in part as “the action of a person or the enabling of another to alter a coin’s surface or appearance, usually to diminish or conceal defects, and thereby represent the condition or value of a coin as being superior to its actual condition or value.”
Those unfamiliar with coins will have a difficult time discerning doctored coins. If you’re selling coins, however, and know little about them, it is in your interest to hire a consultant who can look over a consignment.
A local coin shop owner or coin club member usually only charges about $100 to do the task.
Auctioneers who belong to the NAA also should remember the association’s code of ethics when dealing with doctored, deceptively labeled and counterfeit coins. According to the Preamble, members are required to go beyond laws and professional regulations, conducting business “in a manner that serves the public interest, protects the public trust and furthers the goals of their profession.”
One such vehicle to accomplish that is requiring consignors to sign a form that states they will reimburse the auctioneer when coins are returned with evidence of doctoring, deceptive labeling or counterfeiting. Contact your company’s attorney to ensure appropriate wording.
Proxiblog is an independent entity with no connection to the auction portal Proxibid. Our intent is to uphold basic numismatic standards as established by the American Numismatic Association and the National Auctioneer Association and to ensure a pleasurable bidding experience not only on Proxibid but also on similar portals such as iCollector and AuctionZip.