Self Directed IRA Scams

Unfortunately as the self directed IRA industry continues to grow, so too have the number of self directed IRA scams. IRA accounts are often where people hold the largest portion of their investable assets. Naturally scammers have caught on to this, and are now targeting self directed IRA investors in mass.

Typically the scams involve some investment opportunity that is too good to pass up – or so they want you to believe. These scammers will attempt to hook you on the potential investment returns, and then try to get you to invest as much money as you can. If you don’t already have a self directed IRA, they will likely urge you to set one up. Again, they are going to try to get every penny they can out of you.

There are numerous types of investment scams to watch out for, but the biggest one impacting self directed IRA investors tends to be the ponzi scheme.

A ponzi scheme is a scam where the investment provider brings in investors promising what tends to be aggressive payouts. The scammer will actually pay out the exorbitant returns for a time – using the investor’s capital rather then legitimate investment returns. The idea is that once investors receive a few payouts, they will get excited about the investment and invest more capital and/or get their friends to invest. The scammer will continue paying out investors using new investment capital as long as they can – along with paying themselves a good sum of money of course. Eventually the scam comes to an end when the flow of money dries up. Depending on how much new capital flows in, these scams can sometimes go on for years (ie Madoff). However, typically since no real investments were ever made, eventually it has to end.

With self directed IRA scams becoming increasingly troublesome, the SEC has issued an investor alert dealing with the topic. Here is a link to the alert.

The moral of the story is, don’t take what investment promoters tell you for granted. Anytime you plan to invest a large sum of money – with or without a self directed IRA – you need to perform extensive due diligence. Investigate the investment opportunity, and the provider, inside and out. If they don’t have satisfactory answers to your questions – move on. If you aren’t sure what questions you need to ask, get help. If the investment looks to good to be true – it probably is. Everyone has heard that before, yet in the heat of the moment investors can forget about that little adage which tends to ring true again and again.

If you have been a victim of a self directed ira scam, or have had a run in with a self directed ira scammer, we encourage you to share your experience in the comment section below.

2 thoughts on “Self Directed IRA Scams

  1. Hi Mike,

    As far as fees for setting up a self-directed IRA LLC, it really depends on the facilitator you use. Setup costs typically fall into $1,500-$3,000 range, and then ongoing custodial fees will typically run from $100-$300 a year.

    If you want to review some different facilitators, you can view our list here:

    It is not advisable to setup your LLC account yourself, as there certain things which must be done correctly in order to avoid having the LLC investment looked at as a prohibited transaction – it just isn’t worth the risk. If you want to go that route, you should definitely have everything reviewed by a good attorney (which will probably end up costing as much as having a facilitator do it for you).

  2. Please send me a complete list of fees associated with a checkbook ira. I currently have a small business LLC that I opened myself without any help from lawyers and thought I could save money by opening the IRA LLC myself? Would it be against tax regulation for me to open the IRA LLC myself before turning it over to a custodian?

    Thanks, Mike

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>