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Khachir7

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Reply with quote  #1 
For some reason, i cannot write on the BD forum - was not able to create an account...so, i can only write here.
In response to the suggestion that the metal might have been used for expenses for many years, i remembered that a couple of years ago (2013?) BD changed its policy and told everyone to get their metal out. It sounded like, at that time, there was no issue that the metal was tapped into. Just thinking.
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JG

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Reply with quote  #2 
Ah, that is useful information.

Looking at the forums, it looks like in October, 2012, they changed from wanting to store metal for everyone to expecting people to take delivery within 21 days (for new orders). That strongly suggests that they had most/all of the metal on hand at that time.
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tboll

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Reply with quote  #3 
Yes, I do recall that and thought it was a little strange but I figured maybe they were running out of storage space and wanted people to clear out their gold (to save on vault rent).  In the end, maybe they were giving a warning that you had better get out while they still had it to give you.
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Khachir7

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Reply with quote  #4 
I think that the worst case scenario options are 1) metal theft or 2) BD entered into derivative transactions (i.e. speculation) and lost. Can't imagine that he spent several hundred thousand or more on reasonable operations. Metal theft could have been protected by insurance (partly?) but no protection against market speculation. Any other (real bad) scenarios you can think of? Oh, 3) the CEO took the metal/$ and ran off to, say, Venezuela.
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Khachir7

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Reply with quote  #5 
Question for admin: could the CEO use against us the fact that we agreed to take delivery within 21 days but never actually requested it?
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JG

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Reply with quote  #6 
Quote:
Originally Posted by Khachir7
Question for admin: could the CEO use against us the fact that we agreed to take delivery within 21 days but never actually requested it?


I cannot see any way that could be used against the customer.

That came from a forum post, and I see no mention of it in the Terms of Service. I believe that at best it is company policy, that they would be responsible for enforcing (they even acknowledge that exceptions are allowed, and that they might have to enforce the policy if too many people take advantage of the storage). I cannot see how you could be held responsible for something Bullion Direct posted in the forums.

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jas

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Reply with quote  #7 
Regarding #6: I seem to recall an email form Bullion Direct sometime in about 2012 advising me of the change in the policy of storing product. I also remember something about a 21 day portfolio storage time limit (although any metal stored prior to the policy implementation was grandfathered in and could remain in storage). I also recall sometime after the policy went into effect writing to BD and asking for a storage extension beyond 21 days as I acquired metal. I received an affirmative response saying that there was no problem storing the metal for a reasonable time. I believe BD and I agreed on two to three months. I'm sure I no longer have those communications, although I check my files and archives.
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shannon

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Reply with quote  #8 
Quote:
Originally Posted by Khachir7
Question for admin: could the CEO use against us the fact that we agreed to take delivery within 21 days but never actually requested it?


That would be hard for the CEO to argue.  The question I would ask is, "Or else what?"  There is no way anyone could reasonably assume that you would forfeit all of the gold if you did not place a draw within that period.  And with no contact from the business before the clock expires?

Even my dry cleaner contacts me if I forget some clothes that I dropped off before doing whatever she does with unclaimed items.
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tboll

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Reply with quote  #9 
I finally got around to reading the terms of service.  Please note 6.7..

6.7     When Title to Products Passes to Customer.  Title to the Products purchased by Customer shall pass to Customer upon delivery to Customer or Customer's appointed agent or designee. Products that have been delivered to BullionDirect®?s storage facility for Customer will be held in safekeeping on a fungible basis and Customer will receive title to an undivided share of the Products so held. Notwithstanding the passage of title to Customer, BullionDirect® may use such Products, in fungible form, held for Customer. Customer understands that such usage of the Products in this form may result in gains or losses, which will inure solely to the benefit of BullionDirect®. 

Does that say what it sounds like it says??  That we (customers) understand that they are using our undelivered gold and that it could result in LOSSES to BullionDirect (to the tune of going out of business)?  Does this constitute a warning to their customers that storing metal with BD could result in LOSS of gold (but gains would solely be to the benefit of BD).  Afterall, if the company uses and loses the customers' gold, and suffers company losses, it won't have the money to buy back the gold.  In the end, the customers would ultimately foot all the risks while the company would get all the benefits.


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jas

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Reply with quote  #10 
I think that, ultimately may become a question for the court. Of course there are gains and losses over time, and BD could not be held accountable if I bought high, the price dropped, and I had really severe buyers remorse - that's what I took section 6.7 to mean.

But does the business model allow for total virtual material? I think one of the ultimate questions is what does fungible mean in this case. Is an ounce of gold equil to an ounce of gold? Or is a one ounce gold American Eagle equil to a one ounce gold American Eagle. And what about a diamond and the equivalent weight (atomic amount) of carbon? Approaching with another example, is a barrel of crude oil equil to a barrel of crude oil? Provisionally, yes. Is a barrel of petroleum distillate equil to a barrel of crude oil? Although the constituent parts are essentially the same, that equilivance is probably void because of the different value addition in the distillate. Back to the gold; I would argue that the one ounce gold American Eagles that I had purchased and were in storage could be paid out with any other one ounce gold American Eagle, but not with any other form of gold (for one reason, the value added that it's recognized as U.S. currency unlike a one ounce gold Canadian Maple Leaf). I'm sure someone else could argue that, as long as the conversion was taken into account, that gold could be paid out in frozen chicken dinners. That's why, ultimately this may be a question before a court.

As an aside, because much of law is based on precedence; has anyone ever purchased specific product from BD and been paid out with something substantially different? That could establish a business practice related to fungibility. I seem to remember several years ago when one draw from BD was a bit late I received an email stating that they did not have whatever product I was on record as having purchased and they were asking to substitute another item (both were gold). I replied no, I'd rather have the product I expected. I received a prompt affirmative response and was notified shortly thereafter that the product I expected had been obtained and shipped. It was and I got what I expected. However, this suggests a particular business precedence.
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harley_52

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Reply with quote  #11 
I always thought it was a bad idea to have them store your product.  In all of my orders, I have requested immediate delivery.  For fifteen previous orders, all were delivered within a few weeks.  That gave me a (apparently false) sense of security in dealing with BD.  I started out making small orders just to see how it went.  It was fine for over four years.  Then I make my biggest order yet and we all know what happened.
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JG

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Reply with quote  #12 
Quote:
Originally Posted by tboll
"Customer understands that such usage of the Products in this form may result in gains or losses, which will inure solely to the benefit of BullionDirect®. "

Does that say what it sounds like it says??  That we (customers) understand that they are using our undelivered gold and that it could result in LOSSES to BullionDirect (to the tune of going out of business)?


Yes and no (according to my interpretation of the term -- as a reminder, IANAL).

I read it to basically say that [1] Bullion Direct can use the stored metal (in a sentence before the one quoted), and [2] if they profit somehow from doing so, you can't get that profit (and won't have to pay for any loss).

So if, for example, BD gave your gold eagle to a customer today, and replaced it next month (but had to pay an extra $100 to do so because spot had gone up), BD would be responsible for the loss. But no matter how much they lose, they would still owe you your metal.


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tboll

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Reply with quote  #13 
They would "owe" us, but again I interpret that if they foolishly squandered the gold, ultimately the customers would be the losers (as their business went under) since they "borrowed" the gold from us.  And we would go from owners storing gold with BD to being creditors loaning gold to BD.
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shannon

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Reply with quote  #14 
tboll, I wouldn't worry too much about the Terms of Service.  If it's illegal, it's illegal.  I don't think the terms of service would change that.  Also when people were talking about the request to take a draw within 21 days, I don't think it means you forfeit all right to your bullion if you don't take the draw.  A penalty, sure --- loss of your entire asset, no way.

Admin, along with the Tulving case and others, I think you have the makings for a pretty good book here.


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tboll

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Reply with quote  #15 
Shannon, I don't know about the legalities of what they did (or if they even did cash out the gold, or for that matter, if they even bought the gold in the first place).  What I am saying is that we are now all smarting because this misfortune happened "as a total surprise and without warning."  But as another Lesson to Be Learned, maybe it shouldn't have been such a surprise to us and maybe if we had been more careful about reading the Terms of Service we would have been clued into this potential risk. 
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