Federal investigation is looking for at least $75 million in missing silver and gold from a Delaware warehouse

The empty vault’s heavy steel door stood ajar on the last day of November, beside the last mirror-bright silver proof coins, set in piles to be sold at auction.

Court-appointed receiver Kelly Crawford had been overseeing this depleted storage facility of First State Depository Co. LLC for the last year, arriving the previous fall with U.S. marshals and a judge’s order. He and auditors from Baker Tilly checked the coins against records showing about $140 million in gold and silver. Much was missing.

About 2,100 customers stored gold or silver at First State in labeled boxes, like bank deposit boxes. Many were retirees who had been persuaded to include precious metals in their IRA or 401(k) accounts. For tax reasons, they needed to store the metals in a secure place away from home, which First State claimed to offer.

“Most of these investors were elderly people,” Crawford said. “They were investing their savings. It’s tragic.”

Crawford’s team recovered $64 million of precious metals from nearly 1,000 boxes and sent it back to the owners.

The rest of the boxes were missing gold and silver worth $76 million. Some were empty; some had silver but none of the listed gold; some were stuffed with paper IOUs. About 140 customers the receiver identified haven’t filed claims.

First State Depository Co. LLC has been hit with a string of federal criminal and civil complaints and has been taken over by Crawford.

The company has been ordered to pay “restitution” for the missing metals, plus penalties, in a civil settlement with the federal Commodity Futures Trading Commission.

First State’s founder, Robert Leroy Higgins, who has testified he spent more than 40 years as a trader in precious metals and money, now faces two sets of criminal fraud charges. He’s out on conditional release while awaiting trial.

Last summer, federal agents conducting a court-approved search of Higgins’ home found two pounds of gold coins — worth about $72,000, not enough to dent investors’ losses — in a bedroom ceiling at his million-dollar home near West Chester. But most of the restitution has yet to be paid.

Higgins’ lawyer, Pennsylvania attorney Jeremy Gonzalez Ibrahim, says case documents tell a “one-sided” story. He declined to say more, citing the pending cases.

When stocks, bonds, or online dollars are traded or stolen, the transaction leaves a record for forensic investigators to trace what happened to the assets. But, Crawford said, “when you are talking about coins or silver bars, when they’re missing, there’s no trail.”

Precious-metals storage is one of the niche industries in “America’s Corporate Capital,” Wilmington. Starting in the 1970s, the former Wilmington Trust Co. piled gold bars and 55-gallon drums of silver coins on skids in vaults below its high-rise headquarters on Wilmington’s Rodney Square and tracked them for futures and options traders at the New York Mercantile Exchange and other markets.

Such traders can buy and sell fortunes daily — free of state taxes in Delaware. In the early 1990s, Wilmington Trust boasted that it ran the largest private gold and silver depository in the United States.

When the bank pulled out of that business in 1997, at least three independent Wilmington warehouses moved into the vacuum to store precious metals.

One of those was First State Depository Co., opened by Higgins in 2006 on a street of warehouses spread between rowhouse blocks on Wilmington’s east side.

Wilmington Trust and its successors that handle precious metals for big commodities traders have been regulated by the state banking department. But First State’s particular focus on metals trading and storage wasn’t subject to Delaware bank licensing or regulation law, said Alexis Webb, a spokesperson for the Delaware Department of State, which promotes Delaware as a corporate center.

First State focused on smaller clients — often individual retirement savers dazzled by pitchmen touting gold as a shelter against inflation and unreliable national currencies. The company got its name onto lists circulated by retirement account custodians who urged savers to consider buying precious metals.

Such referrals helped First State grow. Higgins, however, filed for personal bankruptcy protection in 2016 and again in early 2022.

By 2022, First State customers, concerned about missing monthly reports and unable to verify some of their investments, were complaining to the federal Commodities Futures Trading Commission and talking to federal investigators. In June of that year, Higgins was criminally charged in Delaware in a sealed indictment, a step federal prosecutors sometimes take when they want to protect sources while considering further action.

The case, which remains pending, includes five counts of tax evasion and two of mail fraud.

“He used business expenses to pay personal expenses,” IRS special agent Antonino Lo Piccolo said at a hearing in April 2023.

Higgins was given conditional release over prosecutors’ protests. In August, he filed for bankruptcy again.

In September, federal officials obtained a restraining order that turned Higgins’ companies over to Crawford as receiver. Letters were sent to investors — the first sign, for many of them, that First State was in trouble.

When Crawford took charge of First State’s warehouse, truck yard, and interior vault, much of the metal was gone and untraceable. Unlike stocks or bonds, silver isn’t marked with owners’ codes, and even stamped gold can be readily melted into other forms.

In October, the commission filed civil charges against First State, affiliated companies, and Higgins, alleging that starting at least as far back as 2014, the group had misappropriated millions and lied about insuring the gold and silver with Lloyd’s of London.

Higgins said he was nearly broke and asked U.S. District Judge Maryellen Noreika, who was hearing the criminal case, to approve public funds to pay his lawyers.

In the April hearing, Noreika questioned how Higgins could be spending tens of thousands on vacations and maintaining his home in Chester County, if, as he also claimed, he hadn’t worked or made a profit from his companies since 2012 and was surviving on Social Security and about $60,000 a year that First State paid his wife.

“Most criminal defendants whose counsel is being paid for by the public are not in Hawaii for 14 days,” the judge noted.

On June 9, receiver Crawford joined federal agents on their search of Higgins’ West Goshen home. Besides finding coins in the ceiling, they turned up records that Higgins had continued shipping gold and silver worth tens of thousands of dollars to a West Coast metal dealer through the fall and winter, and that his wife had bought a Hummer, which he had offered to pay for partly in gold.

Five days later, federal prosecutors hit Higgins with a second set of criminal charges: defrauding one investor of more than $800,000, out of $1.2 million he spent on previous metals with First State; lying to the court about his financial status at the April hearing; and witness tampering and intimidation, in general remarks (”Silence is GOLDen”) that he had made in phone calls or posted on social media after he realized at least two of his employees had been talking to the government.

In July, 10 months after bringing its case, the commission won a consent order against the companies and a default judgment against Higgins, including a ban on Higgins’ future participation in the commodities business.

Higgins’ companies were ordered to pay up to $112.7 million in “restitution” — the high end of the commission’s estimates on how much his customers had lost — plus $33 million in penalties. The commission said it was “rooting out fraud in the precious metals markets,” and “vindicating victims’ interest,” said Ian McGinley, its enforcement chief.

But where’s the money?

The commission in its victory declaration admitted that the investors might not get it back.

Investors said they’ve been contacted by the FBI as recently as early December, amid an ongoing criminal investigation. Some shared their stories in hopes they will serve as warnings.

Victor Martel, a Florida dentist, bought $160,000 in U.S. gold coins in 2014. He was pleased that gold more than doubled in value over the next seven years, and silver also spiked, as monthly reports on his First State investments showed.

Then last year, reports stopped coming. He complained. “Suddenly we got the letter from the receivership” warning that most of his precious metal was gone. He was shocked. At first, “I though that was the scam.”

Instead of more than doubling his money, Martel got back about one-quarter of his investment.

“The receiver did an audit. None of the gold was there. ... They sent us some of the silver that was still in our box,” Martel said.

He said he sent his gold to Delaware because the custodian who helped track his retirement account, New Direction Trust Co., of Louisville, Colo., listed it among the depositories he could use. None were in Florida.

First State said it was insured by Lloyd’s of London, Martel said. “But now we have learned they never had insurance.“

Custodians such as New Direction “were misled into believing the metals were securely stored,” said Claire Doyle, marketing director at New Direction. She added that investors, not custodians, are responsible for which depositories they choose from a custodian’s list.

Luby Sidoff, a retired Florida advertising manager, bought and stored gold at First State after hearing a pitch at a 2018 “alternative investment” seminar in Orlando arranged by South Dakota-based NuView Trust Co., another retirement custodian.

“I took about $60 grand out of my Vanguard 401(k)” and purchased gold coins, Sidoff recalled. “I bought them from a company in Texas, American Gold Exchange. They told me how it had to be held by a third party” to avoid taxes.

Sidoff figures that with the way gold has risen — to $2,100 an ounce from $1,200 when he bought the coins — he lost more than $100,000. “It makes me ill,” he said.

About a year before federal agents moved in, Sidoff called First State intending to cash out his original $60,000, leaving the profit invested. Higgins himself talked Sidoff out of that. “He said, ‘What’s changed since you bought it? Gold is gonna do nothing but go up.’ ”

Sidoff said he “assumed depositories were government-regulated in some way.”

NuView Trust Co., like New Direction, listed First State as a vendor, but the company’s president, Jason De Bono, said that his company gave no guarantees about the depositories.

“Clients choose their own custodian. This is self-directed by its nature. In the world of investments, there’s no protection for fraud,” De Bono said, adding that he felt bad for victims.

People in the precious-metals industry say the First State case has damaged the industry’s reputation and have called for more regulation.

“We need more people to get onto people like him, because they are a thorn in our side,” said David Crenshaw, executive director of the Georgia-based National Coin and Bullion Association.

“I know the case very well,” said Doug Davis, director of the Anti-Counterfeiting Educational Foundation. “Depositories ought to be regulated by the state they are located in.”

He notes that Texas in 2015 passed a law setting up a privately run but state-regulated and -staffed bullion depository. That was five years after an Austin precious-metals facility owner was sentenced to 10 years in federal prison for diverting customers’ money to pay his own expenses and money-laundering.

“There needs to be state-level regulation,” said Crawford, the receiver.