New Direction Facing Class Action Lawsuit Over $110M in Precious Metals Stolen from Retirement Accounts

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A proposed class action lawsuit aims to represent hundreds of precious-metals self-directed individual retirement account (SDIRA) owners who were steered toward First State Depository by New Direction Trust Company and, as a result, allegedly lost tens of millions of dollars in retirement savings. 

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According to the 37-page suit, defendants New Direction IRA and New Direction Trust Company gave SDIRA owners upon opening their accounts a short list of depositories at which their precious metals—silver bars, coins, etc.—would be “safely locked away and insured.” On this list was First State Depository, LLC, about which the defendants never warned proposed class members that there was “even the slightest reason to be worried,” the filing stresses. 

In 2022, however, the Commodity Futures Trading Commission (CFTC) sued First State Depository (FSD) and its owner, Robert Higgins, over allegations that FSD and its co-defendants had stolen more than $110 million of the precious metals they were supposed to have safeguarded, the lawsuit states. 

According to the complaint, 90 percent of the missing precious metals—mostly gold and silver—belonged to SDIRAs, more than 50 percent of which were New Direction SDIRAs. 

In the wake of the CFTC lawsuit, FSD was placed in receivership, and despite efforts to recover the missing property, more than $78 million in precious metals and currency remain missing from FSD’s vaults, the lawsuit says. 

The lawsuit states that, according to the receiver, the precious metals theft from FSD is the single largest theft from a depository in United States history. 

“Meanwhile, Higgins has been arrested and faces criminal charges,” the suit adds. 

According to the complaint, an SDIRA can hold various alternative investments normally prohibited from a regular IRA retirement account. Whereas IRAs are traditionally limited to stocks, bonds, certificates of deposit and mutual or exchange-traded funds, SDIRAs, which are largely unregulated and typically come with higher fees, allow for a consumer to save for retirement by way of real estate, precious metals and rare coins and collectibles, the filing explains.

The lawsuit states that a precious metals SDIRA involves as many as four different entities: a custodian, an administrator, a precious metals dealer and, critically, a precious metals depository. An SDIRA custodian holds the title to the precious metals in the SDIRA and is tasked with executing all asset movements, while the administrator is responsible for handling paperwork and filings, account maintenance, transaction reviews, account statements, and other management roles, the case says.

From there, a precious metals dealer is the entity engaged in the buying and selling of precious metals, while the depository is typically a third-party storage facility that, in exchange for a fee, stores and secures different types of precious metals, the filing continues. Importantly, because the IRS does not allow for a precious metals SDIRA investor to hold the precious metals in their own home or safe-deposit box, they must use a precious metals depository in order to obtain the “preferential treatment” given to IRAs, the case notes. 

In its lawsuit, the CFTC alleged that FSD and its co-defendants violated the Commodity Exchange Act and engaged in fraudulent and deceptive schemes regarding the purchase, receipt, storage and exchange of precious metals, the complaint states. In particular, the agency alleged FSD misappropriated clients’ funds and assets, misled clients to believe their precious metals were at FSD, deceived clients about their assets when they attempted to transfer or obtain possession of the metals, and lied about the amount and existence of insurance coverage held by FSD, the proposed class action says. 

According to the suit, the plaintiffs chose FSD as their depository because New Directon said that a depository was necessary and represented that their precious metals would be safe there. The filing alleges that New Direction failed to disclose its “special relationship” with FSD, including that Higgins and those in charge at New Direction “have been friends outside of work and within the industry for many years,” and that their companies have “long enjoyed a close business relationship.” 

“Despite knowing, or having reason to know, that knowledge of its referral arrangement and close relationship with FSD would justifiably have caused Plaintiffs to distrust FSD, be less likely to choose FSD, more closely scrutinize FSD, or more closely monitor FSD if nevertheless selected, New Direction failed to disclose its referral arrangement and special relationship with FSD to Plaintiffs before (or after) Plaintiffs funded their SDIRAs,” the lawsuit alleges. 

The case further claims that New Direction misrepresented the amount of insurance FSD had and failed to disclose to its clients “important facts and concerns” about FSD, including that it had been added to a list of companies with which New Direction would no longer do business. 

The suit looks to cover all New Direction IRA, Mainstar Trust and New Direction Trust Company precious-metals IRA owners whose precious metals were supposed to be on deposit with First State Depository Company as of September 27, 2022 but lost some or all of the precious metals held by their IRAs due to the defendants’ unlawful actions. 

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