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March 31, 2015 4:40PM EST

Summary: Goals of This Page

Kitco used to make some statements about the Kitco Pool that customers relied on to determine if the Kitco Pool was safe for them. Some of these statements appear to no longer be true.

The goals of this page are to alert people to the known relevant facts, to explain why I believe that that a prudent investor does not currently have enough information to safely invest in the Kitco Pool, and for Kitco Pool customers to request the necessary information from Kitco. With more information from Kitco, I believe the Kitco Pool will be safe for some investors; without that information, I cannot see how it can be safe for the vast majority of investors.

A prudent investor will know if an investment is safe for them, which requires knowing the advantages and drawbacks of the investment. The drawbacks of the Kitco Pool are now unknown, making it impossible to safely invest in it (without further comment from Kitco).

To be clear, I am not trying to tell you whether or not the Kitco Pool is safe for you; that depends on your unique circumstances, and facts which Kitco is not disclosing.

Why I Am Writing This Page

Lots of people have invested in the Kitco Pool (customers have about $250M in it). Many people want to know if the Kitco Pool is safe1. Almost nothing has been written about the safety of the Kitco Pool since around the time they filed for the Canadian equivalent of 11 bankruptcy in the United States in 2011 (Google shows just 8 hits for '"Kitco Pool" safety' in the past year, none about Kitco Pool safety). And Kitco no longer claims that the Kitco Pool is 100% backed by physical precious metals, yet most people seem to assume so.

From this, there are clearly facts and comments that customers are looking for and are not getting, and it looks like people are relying on outdated information which could make their safety determinations inaccurate. I am therefore very concerned that many Kitco Pool customers are taking on a risk greater than they originally thought.

I also believe that Kitco has changed their policies without letting their customers know, and has an obligation to tell them. If Kitco comes clean with their customers, their customers can make an educated assessment as to whether the Kitco Pool is safe for them. Without that information, I find it hard to believe that most customers can safely invest in the Kitco Pool. So I am hoping Kitco will update their website with the current information.


Please read the disclaimers below (in short: this page is not intended to cover Kitco itself, the facts given are intended to support the conclusions, it is intended for a U.S. audience).


  • No prudent investor would invest in an unallocated account (such as the Kitco Pool) instead of an allocated account, unless the advantages (such as low costs) outweighed the drawbacks (typically the concern of loss of money in the event of a bankruptcy).
  • For years Kitco used to clearly state that the Kitco Pool was 100% backed by physical precious metals.
  • Around late 2011 Kitco stopped making this claim2
  • Kitco was insolvent in June, 2011 (due in part or whole to the highly contested Revenue Quebec tax claims)
  • In June, 2011 the ARQ (Revenue Quebec, the local taxing authority) raided the Kitco headquarters. They seized $25M of metal backing the Kitco Pool.
  • In June, 2011 Kitco filed for the Canadian equivalent of Chapter 11 bankruptcy (CCAA).
  • 100% of the precious metals in the vault at Kitco's headquarters on June 7, 2011 was part of the Kitco Pool.
  • Kitco Pool customers are not considered creditors of Kitco (specifically, they are not listed as creditors in the CCAA creditor list).
  • Metals company Heraeus at one point attempted to hold $1.8M of Kitco Pool inventory, claiming they were entitled to hold it as collateral when Kitco owed them money but did not have the liquidity to pay them (Kitco did contest this attempt).
  • It is not known if any metal backing the Kitco Pool is ever lent out or otherwise encumbered
  • It is not whether any metal backing the Kitco Pool is considered an asset in the bankruptcy (CCAA) proceedings, which is critical for Kitco Pool customers to know. The Monitor is not releasing the "Pre-Filing Report" which I believe contains this information.
  • The Kitco Pool is considered an "obligation" in the bankruptcy (CCAA proceedings).

The Unknowns/Questions

Here is a list of questions I come up with, when faced with the facts mentioned:

  • Is the Kitco Pool still 100% backed by physical precious metals?
  • Who legally owns the metal backing the Kitco Pool? It would be absurd to think that it is individual Kitco Pool holders (which change frequently). Is there a legal entity that comprises all Kitco Pool customers? If so, what is it?
  • How could Revenue Quebec seize $25M of Kitco Pool if it was segregated from Kitco assets, and not owned by Kitco?
  • If Kitco did not have the ability to pay Heraeus the $1.8M Heraeus claimed it was owed, and the metal backing the Kitco Pool is owned by Kitco Pool customers, how could Heraeus have used the Kitco Pool as collateral? How can someone use goods as collateral without the permission of the owner?
  • Is the metal backing the Kitco Pool ever lent out or otherwise encumbered?
  • If the Kitco Pool is not part of Kitco assets, how come 100% of the metal seized by Revenue Quebec from Kitco vault at their headquarters were part of the Kitco Pool?
  • If Kitco Pool holders are not Kitco creditors, who do they have recourse against if Kitco is liquidated in bankruptcy? [06 Apr 2015 Update: Presumably, a new bankruptcy action would result, and Kitco Pool holders would be considered creditors at that point. This is an educated guess, though; the Monitor declined to respond to my query.]
  • Why does the CCAA monitor not believe Kitco Pool customers should be considered creditors of Kitco3, if Pool holdings are Kitco obligations? In general, holders of unallocated accounts are unsecured creditors of the dealer offering the accounts.


From the facts that I have discovered, it is clear to me that the Kitco Pool is no longer 100% backed by physical precious metals, despite what many Kitco Pool investors have been led to believe. I believe that it is partially backed by third-party pool accounts (which themselves are unlikely to be 100% backed by physical precious metals4).

The facts make it pretty clear that it is no longer backed by large bars, as was previously claimed. It can now be backed by just about anything, including scrap and third-party pool accounts that are not themselves 100% backed.

It also looks like the metal behind the Kitco Pool is Kitco's "general stock" (as is the case with most unallocated accounts) that it uses as inventory.

From the facts, I have to assume that at least some of the metal behind the Kitco Pool is either not titled in the name of customers as previously claimed, or not segregated properly. Otherwise, Revenue Quebec should have known that the Kitco Pool assets did not belong to Kitco, and should not have seized them.

At this point, I do not know what would happen to Kitco Pool customers if Kitco were to be liquidated in bankruptcy. If Kitco customers are not considered creditors, they would not be able get any money from a Kitco bankruptcy liquidation. So would Kitco Pool assets be part of Kitco's estate (and go to other creditors), or somehow separate (and go to Kitco Pool holders)? If the Kitco Pool was seized by Revenue Quebec, presumably a bankruptcy liquidation would consider the metal part of assets available to Kitco creditors. That would potentially leave Kitco Pool customers with nothing, if they are not considered creditors. [06 Apr 2015 Update: Presumably if a liquidation were to occur, the CCAA proceedings would terminate, with a new bankruptcy resulting, that Kitco Pool holders would be creditors of.]

Questions To Ask Kitco

At this point, I believe almost any prudent investor would need to get more information from Kitco if they wished to purchase or continue holding the Kitco Pool. So what should be asked? These are questions I would demand an answer to. Remember, you need to have answers to the questions you would want answered before investing in a standard unallocated account anywhere, plus questions to reassure you given that Kitco is in bankruptcy (CCAA insolvency).

  • Is the Kitco Pool 100% backed by physical precious metals? Anything implying "yes" without being clear should be clarified.
  • If the backing is not just physical precious metals, what does back it? For example, third-party pool accounts, unallocated accounts, long futures contracts, options, forwards, etc.
  • If it is not 100% backed, what protection is there if there is a large rise in price, to ensure that Kitco can pay back all customers?
  • Is the metal backing the Kitco Pool ever lent out or otherwise encumbered?
  • Exactly how is the metal titled? What documents exist that show the titling?
  • If Kitco were to go through a bankruptcy liquidation, how would Kitco Pool customers get paid, since they do not appear to be considered creditors?
  • Is the Kitco Pool segregated from Kitco assets? If so, how?
Remember, the goal here is not to attain 100% safety -- unallocated accounts are typically not 100% backed. The key is knowing what the facts are, which you can then use to determine if the Kitco Pool is safe for you.

Further Information

Background of the Kitco Pool

The Kitco Pool is an unallocated precious metals account. In the metals world, you can buy gold or other metals in unallocated accounts or allocated accounts. With allocated accounts, the metal is normally segregated (physically separate from the dealer's metals and that of other customers) and allocated (legally yours, titled in your name). Unallocated acccounts are essentially an "IOU" where you are owed the metal, and are normally backed by the general stock of the dealer (the metal in their inventory). Unallocated accounts are inherently less safe than allocated accounts, so nobody would intentionally buy metal in an unallocated account unless there are advantages that outweigh the disadvantages (usually lower costs, such as the lack of storage fees).

The Kitco Pool was started somewhere around or before the year 2000. I believe that one of the main reasons it became quite popular is that Kitco claimed that it was 100% backed by physical precious metals, that were not part of Kitco's assets, belonging entirely to Kitco's customers who are Pool holders. As we now know, these facts are now either no longer true or highly questionable.

General Unallocated Account Drawbacks

The main drawback to unallocated accounts is that since you do not legally own the metal, in the event of a bankruptcy liquidation you would normally be an considered an unsecured creditor. That means that any secured creditors would typically get paid first (such as banks that have a lien on inventory, and the IRS in the United States), and whatever is left over would get split among all other creditors (including suppliers and the like), after legal and other fees have been paid. You might get pennies on the dollar, or possibly nothing.

Kitco Pool Unique Safety Features

Presumably to address the general drawbacks of unallocated accounts, the Kitco Pool has been promoted as 100% backed by physical precious metals, not part of Kitco's assets, belonging entirely to Kitco's customers, and segregated from Kitco's assets.

That sounds like it provides protection that goes well beyond what most unallocated accounts provide. It sounds like it is very close to an allocated account, except that the title is in the name of all customers rather than individual ones.

As noted above, however, it appears that these safety features are no longer present.

Kitco's Responses

I feel it important to explain to you Kitco's reaction to my concerns (and those of the Monitor that oversees the CCAA proceedings).

In July, 2014 when I asked the CCAA monitor some questions, they referred me to the documents I had already reviewed (CCAA documents and the Kitco website), and then chose not to comment when I said that I felt the information allowed the Kitco Pool to not be 100% backed by metal. At about the same, Kitco's customer service was only able to refer me to their website, and unable to provide further details.

In March, 2015 I sent an E-mail to a contact I had there, whose job it was to address concerns like this. He no longer works at the company. I forwarded the E-mail to customer service, who confirmed he no longer worked there, but they never responded to my concerns. I then forwarded it to owner Bart Kitner, and received no response. I finally sent Kitco a link to a draft of this article (asking them to point out any errors or faulty reporting and inviting comments). It looks like several people at Kitco viewed the article -- but they did not respond.

In March, 2015, I asked the Monitor for a copy of the Pre-Filing Report (for which their website has a PDF file saying to request it from the Monitor), and got no response. That is a document that likely contains important information about the bankruptcy/insolvency that could answer some of these questions. I ask several further questions, all of which have gone unanswered. I believe that the Monitor is now ignoring anyone that is not a creditor (remember, Kitco Pool holders are not creditors).

How Do I Determine If It is Safe?

I belive that a prudent investor would:

  • Deterimine if the advantages to the Kitco Pool over an allocated account outweigh any drawbacks. To do that:
  • Determine what the drawbacks are. Is the Kitco Pool 100% still backed by physical precious metals? If not, what backs it? In the event of a bankruptcy liquidation, who would get the metal and how?
  • Look at sources beyond just this webpage. For all you know, I could be some crazy kook who lost my life savings and my tin foil hat told me to blame Kitco.
  • If you cannot find answers to important questions ("Is the Kitco Pool 100% backed by physical metal?", "How is the metal titled?"), ask Kitco. Make sure to ask for the name of the person giving you the answer, to help ensure that they know they may be accountable for errors. Do not accept a vague answer, or reference to a webpage with a vague answer.
  • If you bought the Kitco Pool based on statements that Kitco had made (such as it being 100% backed by physical precious metals, and the metal being segregated from Kitco assets and in the name of Kitco Pool customers), and those statements cannot be verified, the risks are too high for almost any investor. If those statements have changed, see if the new risk level is acceptable for you.

[1] Google proves this. As I write this, typing "Kitco Pool" into Google shows 2 auto-complete entries: "kitco pool" and "kitco pool accounts safe". This shows that based on past queries to Google, they think that if you type "Kitco Pool", you are likely to want to know if Kitco Pool is safe.

[2] Around late 2011 to early 2012, Kitco changed their website so that the "Do you offset Kitco Pool with physical precious metals?" FAQ was removed, and I see no sign of any statements by Kitco after that time that the Pool is 100% backed by physical metal. At this same time, Kitco started saying that the Kitco Pool "may consist of precious metals in any form whatsoever" (which could be construed as meaning 'paper metal' such as futures contracts). In 2012, Kitco stated that Kitco Pool backing includes reserves of gold held through "participation on behalf of its clients in third party pool accounts".

[3] I assume that if the Monitor felt that Kitco Pool holders were owed money by Kitco, the customers would be listed as creditors. I see no reference to Kitco Pool customers (either individually or as a whole) in the creditor list. The Monitor has received inquiries regarding the Kitco Pool, and is well aware that the Kitco Pool is worth in the order of $250M, and should be aware that Kitco Pool holders feel that Kitco owes them that money.

[4] The wholesale bullion industry has "Allocated" and "Unallocated" accounts, which are well defined. The retail industry has "pool" accounts which are normally considered unallocated accounts, unless defined otherwise. A "pool" account cannot be considered as 100% backed by precious metals unless the dealer states otherwise. So if you are told metal is in a pool account, you cannot assume that it is 100% backed by physical precious metals.

This page is only intended to address the Kitco Pool. It is not intended to address Kitco itself (except in regards to the Kitco Pool).

I am writing this in response to concerns that claims Kitco made are no longer true. As such, I have been looking for facts supporting that. Therefore, the facts I present are one-sided; there are other facts you may find useful that I did not see necessary to include (or that I may be unaware of). As an obvious example, I do not discuss the benefits of the Kitco Pool accounts over allocated accounts; it is assumed that the reader is already familiar with these if they have invested in the Kitco Pool or are considering doing so.

This page, as with most of my writing, is intended for readers in the United States. Readers from other locations are welcome to read it; however, they are expected to understand that they need to properly interpret it. For example, my readers are much more familiar with the term "Chapter 11 bankruptcy" than "CCAA", and may feel it necessary to give more scrutiny to doing business with a company outside their country.

My hope in writing this is that Kitco will come clean and accurately report the current status of the Kitco Pool.

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