Early Thursday morning federal agents from the Secret Service and FBI raided the Evansville, Indiana offices of NORFED, makers of the Liberty Dollar and other alternative ‘barter’ currencies of which they claim to have $20 million dollars in circulation. The business, owned by Bernard von Nothaus, mints copper, gold, silver and platinum coinage and produces paper certificates with fixed values based on their reserve of gold and silver.
Their products have become popular with those concerned about the instability of greenback paper currency issued by the Federal Reserve and with the falling value of the dollar relative to foreign currencies. Beyond just providing novelty coinage like their recently minted ‘Ron Paul Dollar’, the company promotes the idea of moving away from using federal paper money as a medium of exchange and using real-value coinage instead, in what is legally considered a barter system, but basically amounts to an alternative monetary system. They have enjoyed substantial success and sales through the internet, and thousands of businesses nationwide accept their coins and paper money.
In Thursday morning’s raid about a dozen agents showed up and seized most of the company’s assets, including computers, paperwork and a large amount of gold, silver, platinum and copper including two tons of just arrived copper Ron Paul dollars. They also froze their bank accounts and seized specie being held in a secure location to guarantee their paper money. The warrants which were served along with some information from the company are available on their website. What is not clear from the documents are the exact reasons for the raid, although the warrant cites money laundering, mail and wire fraud. The argument for the seizure seems to rest in a statement about the Liberty Dollar issued by the US Mint last year, which cites the recommended uses and the design of the ‘medallions’ as intended specifically to set them up as a competing currency to the US Dollar in violation of constitutionally guaranteed exclusive right to mint coinage granted to the federal government. More details are probably in the affidavits associated with the warrants, but they are not yet available.
Von Nothaus’ business has skirted the edge of legality in several areas, but in the past he has managed to walk a fine line without arousing the ire of government by using very carefully chosen terminology and not directly challenging the federal monetary system. More information should be available in the next few days, but it seems likely that the raid came as a result of customer complaints because of delayed delivery of the new Ron Paul coinage for which orders were taken in advance. Another concern may be the discrepancy between the nominal face value of the coins and their actual specie value, which is generally somewhat lower, especially on the new copper coinage. Prosecutors may argue that by placing a dollar value on the coins Von Nothaus was defrauding customers because the real value was substantially lower.
A major concern in this situation is the fate of those awaiting delivery of coins ordered recently which are now in the hands of the government, and those holding paper money which ought to be redeemable for silver in the reserve which was also seized. Their orders cannot be filled with no records and no coinage or specie that hasn’t been seized. At the very least the government should make sure that the interests of these citizens are protected and that they either get their money back or receive what they are entitled to from the company’s assets.
The larger issue which remains to be resolved is whether the government has a legitimate cause of action here in the interest of consumer protection or under the Constitution, or whether as many are speculating, they had been waiting for an opportunity to shut the business down because it was seen as a challenge – however small – to the federal reserve system. As the dollar has dropped in value, more and more people have been listening to the message of radical monetarists like Presidential candidate Ron Paul, who want to do away with the federal reserve system. For many using Liberty Dollars was their way of striking a blow for sound monetary policy. This raid may be the government’s way of striking back.