Stamps sold in Siegel auction swept up in massive fraud scheme

Jul 8, 2024, 8 AM
Items from a May 2023 Robert A. Siegel Auction Galleries sale of India stamps and postal history are at the center of an ongoing United States Department of Justice investigation of a massive fraud scheme. Siegel has not been accused of any wrongdoing.

By Allen Abel, Washington Correspondent

A web of crime that entangled broken hearts, large payments, online swindles and dozens of auction lots of collectible postage stamps was unraveled in late June when the Seattle, Wash., office of the United States Department of Justice opened a window onto what it called “a massive fraud scheme targeting seniors and other vulnerable populations.”

As of Linn’s deadline in early July, no criminal charges had been filed in the case, no suspects had been publicly identified, and no court appearances had been scheduled.

Listed as “defendant” in the in rem procedure (a legal action to recover property) on documents filed with the U.S. District Court for the Western District of Washington in Seattle were “approximately 149 lots of stamps and other collectible items, seized from Robert A. Siegel Auction Galleries, Inc.”

The affected lots are from a Siegel auction of India stamps and postal history that took place in May 2023.

The Siegel firm has not been accused of any crime, according to the Department of Justice. Siegel, based in New York City, is one of the nation’s largest and most prestigious philatelic auction houses.

(In mid-June, Siegel realized a total of more than $19 million for a two-day auction of William H. “Bill” Gross’ complete collection of classic-era U.S. stamps. See the page 1 story in the July 8 issue of Linn’s.)

In a July 3 email to Linn’s, Siegel president Scott R. Trepel provided the following details about the investigation that began last year:

“The investigation first became known to Siegel in August 2023 when the firm was contacted by the FBI. Only one sale, the [May 11, 2023] Magnolia India Part 1 auction, is involved.

“The buyers involved are well-known collectors. One of them arranged for payments to Siegel to be made on their behalf through intermediaries who were never disclosed to Siegel.

“Payments from these buyers were made according to schedule by depositing the funds directly into Siegel’s bank account at various branches throughout the country. Siegel was notified to expect the credits and how to allocate the payments among the invoices involved. Siegel never had possession of any payment instrument (cashier’s checks, personal checks or money orders) in advance of deposit and could only obtain a visual record from the bank weeks after the deposit was made.

“At the time Siegel was contacted by the FBI, only one $20,000 payment was flagged as suspect. The list grew over several months as the FBI, with Siegel’s cooperation, investigated every deposit and depositor to determine if they might be a victim of the alleged fraud.

“At the point it became clear that there were issues with multiple payments received by Siegel. Siegel determined it was prudent to hold the lots pending a complete investigation. In early 2024, the seizure warrant was issued.

“Siegel’s cooperation with the FBI and DOJ investigation was instrumental in identifying the victims of the alleged fraud and hopefully will also assist in holding the perpetrators accountable. As stated in the [June 27] DOJ press release, Siegel is not accused of any wrongdoing.”

A total of 28 victims from across the United States were swindled, according to a June 27 statement from the Department of Justice Attorney’s Office for the Western District of Washington. Investigators said that they have traced $1,012,300 to the various victims. Funds deposited against invoices for purchase of the stamps total $1,383,437.

“Once the stamps have been forfeited to the United States, they will be liquidated by the U.S. Marshals Service and the government will seek to return the funds to the victims,” the DOJ news release stated.

Linn’s has reached out to the U.S. Attorney’s office in Seattle to find out where the stamps currently are located.

A source within the U.S. Marshals Service Office of General Counsel told Linn’s July 1 via email that “the stamps won’t be destroyed.”

“Only thing we destroy are contraband: illegal drugs; drugs precursor/chemicals; guns/firearms,” the source said. “The USMS will hire experts to value the stamps. We do this with other forfeited items.”

According to the source, “the stamps will be sold at auction by USMS. Then, the proceeds will be paid to the victims of the fraud scheme.”

Several items from Siegel’s May 11, 2023, sale of part 1 of the Magnolia India collection valued at more than $10,000 each (including Siegel’s 18 percent buyer’s premium) were among the various Siegel auction lots included in the government’s folio of stamps.

“The fraud occurred in two phases,” the Department of Justice revealed in the June 27 press release. “In phase one, victims were called by a person claiming to be from a government entity such as the FBI, SEC [Securities and Exchange Commission], or DOJ reporting that the victim’s bank account or personal identity had been breached and stating that the victim needed to send their funds to a different entity for safe keeping.

“In some instances, victims were told they had been implicated in a money laundering scheme and to prove their innocence and protect their funds they needed to send them to the account designated by the caller. Victims were told their funds would be returned once the matter had been resolved. Some victims were defrauded of hundreds of thousands of dollars.

“Some of the victims sent cashier’s checks directly to [Siegel Auction Galleries]. Others were instructed to send the money via cashier’s check to a second set of victims: romance scam victims. These victims were contacted via social media, and believed they were assisting a romantic interest with money from an inheritance, or an investment or to pay debts. This second set of victims were told to deposit the cashier’s checks from the first set of victims and then withdraw the funds and send or wire the money to [Siegel Auction Galleries].”

A “verified complaint for forfeiture in rem” filed on June 24 shines a light on the elaborate, multi-layered scheme and the sly entrapment of the victims, including a man identified only as “Alpha.”

Linn’s will continue to follow any developments in this case.

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