Featured An examination of the counterfeit slab epidemic. Scope and advice.

Discussion in 'US Coins Forum' started by TypeCoin971793, Feb 20, 2020.

  1. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    The modern Chinese counterfeiting problem cannot be overstated. They have made counterfeits ranging from BU 1794 dollars to the lowly XF 1958 Wheat Cent. Included in their repertoire are PCGS and NGC slabs. This article will cover the extent of the threat and discuss ways to potentially mitigate the threat.

    I will preface this article by saying this is not a vendetta piece against PCGS, NGC, nor any other third-party grader. It is merely a statement of facts and implications of the scope of Chinese counterfeiting to inform potentially unaware collectors. All statements are true and have been verified to the best of my ability. If anything is factually incorrect, I will publicly apologize and request for a correction to be made. Please correct me if anything is incorrect. No opinions or assumptions are being put forth unless explicitly described as such. Gaps in my knowledge will be indicated as well.

    The Scope

    Counterfeit slabs have been around since 2007/2008, and have become endemic in the ensuing decade. Since they are produced in China alongside genuine PCGS/NGC holders, PCGS and NGC are powerless to stop the counterfeiting. They, however, have a copyright claim in the US and can take action against anyone in the US knowingly distributing fake slabs. However, the vast majority are either not detected, or no serious action is taken to remove them from the market. The TPGs are not to blame for this. When a fake holder is spotted, both PCGS and NGC will update their respective verification pages to warn anyone looking up the certification number. However, PCGS and NGC have taken two very different approaches to proactively combat the issue.

    Slab Verification

    NGC has been taking pictures of each and every coin they certify since fake slabs started appearing on the market (and possibly before, but I have not confirmed this). However, the photos are poorly lit resulting in brown copper coins being almost impossible to match to NGC’s pictures. For all other coins, identifying marks can be distinguished and matched to the coin in hand. This is of limited use to MS/PF-69/70 modern coins because there are few/no identifying marks. Use of other tools, such as the Sigma PMV, or simply comparing the slab itself to the pics can be used instead (comparing the barcode, for example).

    PCGS only provides pictures when they are paid to take them or is submitted in an upper grading tier (AKA TrueViews). If the coin in question does not have a TrueView, then other methods must be performed. They are coming out with a new RFID chip idea for their slabs, but since it only applies to Gold Shield holders (which have TrueViews), it is very redundant and not helpful to the collector. Maybe they will extend it to all slabs, but there are still decades of unprotected slabs.

    Heritage, Great Collections, and eBay sellers (per eBay rules) list the certification number in the listing. The listings can be looked up in Google by searching the serial number and the TPG name (eg. PCGS 12345678). There are pictures are are sufficiently good to verify whether or not the coin in hand matches the one in the pictures. Be aware that the slab in the eBay listing could be fake, so use discretion.

    Keep in mind that if the coin is fake, but the slab is genuine, then you are covered by PCGS’/NGC’s authenticity guarantee. Having a picture provided by the TPG or submitter (Heritage, etc.) of the coin in the slab makes making the claim much easier. However, if the holder is counterfeit, you are on your own, and your only recourse is a refund from the seller or legal action.

    Preventing Data Mining

    A form of Data Mining is when an entity rapidly and repeatedly puts in various inputs and records the outputs. Relevant to this topic is inputting a serial number and recording the coin type, date/mint, and grade. This information is extremely useful for counterfeiters because they can create a database of type/date/mint/grade with matching serial numbers. Then all they have to do is put a “correct” counterfeit coin into the fake slab.

    NGC’s verification tool on their website requires knowledge of both the serial number and the grade. In addition, the website limits how many cert lookups can be completed in a given amount of time (at least they did. It used to be very strict, but they either loosened it up or did away with it. I am not sure.). In addition, the serial numbers are composed of a batch number and the number of the coin within the batch, so knowledge of the number of coins in the batch is also required. All three of these things greatly inhibit a successful data mining operation.

    PCGS’s verification does not require any info other than the serial number. I do not know if they limit the number/speed of lookup attempts, but I have not heard that they have. I would like to assume that they have put such measures in place. Their serial numbers also simply increase numerically (for the most part; not every number is used), so it is very simple to create an input/output database. These are probably the reasons why counterfeit PCGS slabs are far more prevalent than NGC slabs.

    In Heritage, one can search their archives using slab serial numbers. Since their coin operation is highly commoditized, all of the relevant info is stored explicitly and concisely in the listing title. Most of the compromised slab serial numbers can be verified on Heritage, which indicates that they possibly do not have a limiter on search attempts. This also implies that PCGS might have a limiter on its own website.

    How Can You Reduce the Risk to Yourself?

    There are several practices you can employ to protect yourself from fake slabs:
    1. Learn how to authenticate coins. Most of the coins have obvious indicators of inauthenticity. Send me your email via PM and I will send you slides from a counterfeit detection seminar I gave at FUN earlier this year.
    2. Learn how to grade coins. The vast majority of the fakes in the counterfeit holders are much higher grade than what the slab says. If the coin is obviously 4 grade levels or higher (eg AU-50 vs VF-30 or MS-68 vs MS-64), treat it with suspicion. PCGS and NGC are highly competent and very, very, VERY rarely make such a big mistake. Also, if the coin is significantly overgraded (by >2 grade levels), also treat it with suspicion. Not only do you not want to buy it, it could be a genuine coin in a fake holder. PCGS only guarantees their grade within around 2 grade levels. Any more they reserve the right to claim that it was just a “mechanical error.”
    3. Become intimately familiar with genuine slab appearances, style, feel, font, etc. This will require handling thousands of genuine slabbed coins.
    4. Look up the slab serial number on the TPG website or on Google and see if there is a picture you can match to. If there are no pictures, seriously consider passing on the coin if you are not confident in your authentication abilities. If you are confident in your authentication abilities, then go ahead. Just be aware of the limited recourse options you have if the slab turns out to be fake, and possibly limit your purchases to only dealers who guarantee their wares.
    5. Check for any evidence that the slab is a snap-together design. Real slabs are sonically sealed. Many of the counterfeit slabs are composed of two halves that snap together.

    Examples

    There is a wide range of quality in the counterfeit slabs. This example is very low quality with a very obvious counterfeit coin in it. Very few collectors would be fooled by this, but some probably would be. No pictures are available online of the genuine coin, so it could not be visually verified.

    71683762-B0A2-4E46-9B6B-0B45BA40D094.jpeg

    Here is a higher-quality counterfeit in a counterfeit slab. The counterfeit is gem quality, while the slab says AU-58. Someone might get greedy and hope for a big upgrade payday, but the coin is obviously fake, as is the holder. The coin could be verified using images from Heritage. No TrueView.

    388D54F6-4372-4D78-8CE1-7EBB21BEC8E7.jpeg

    Here is a high-quality counterfeit coin in a counterfeit holder. This one is particularly scary as the grade is very close to that on the slab. It could be verified using images from Heritage. No TrueView.

    F3E0C76A-D0C3-4DEE-92EE-FC040AF92255.jpeg

    And here is a genuine coin in a fake slab. Note how it looks like an XF-45 but is in an AU-55 slab. That is a red flag. Also note how the hologram sticker is covering up the QR code. It was sent in to PCGS, where they deemed it to be a genuine coin in a fake slab. No pictures were available to verify this coin.

    F6CDED85-34A5-4A54-9A95-BA424FF5E1F1.jpeg 383F8267-A1A9-45CB-BA8F-C22FD46794EE.jpeg

    Conclusion

    This day and age of computers and the internet has greatly exacerbated the prevalence of counterfeit coins and slabs in the market. The trajectory of the improvement in technology and sophistication of counterfeits is not going to abate anytime soon, meaning the problem is only going to get worse. That means it is of paramount importance to be able to visually verify a certified coin. NGC realized this and took the initiative to take pictures of each and every coin they certified so that they can be matched up in the wild. While their photo quality has its shortcomings (particularly with brown coppers), the photos are by and large a huge help in slab verification.

    PCGS, on the other hand, has chosen to not photograph the coins they certify unless paid to do so or if the coin is submitted in a high-enough tier. They have taken this approach for over a decade despite knowing about the existence of counterfeit slabs. That means that there are millions of potentially-compromised PCGS slab certification numbers, and only a fraction can be visually verified using the techniques outlined above. Coupled with the relative ease of data-mining PCGS serial numbers, this is the perfect opportunity for counterfeiters and scammers. For entry-level collectors and dealers who are dependent on the slabs for authenticity and grade accuracy, this creates a particularly dangerous situation. These reasons culminate into a drastic opinion of mine: PCGS slabs are no longer safe to blindly trust and buy!
     
    Last edited: Feb 20, 2020
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  3. stldanceartist

    stldanceartist Minister of Silly Walks Supporter

    I saw a seller with quite a few fake slabs at the local flea market this past month - one that stuck out was a PCGS slab with the bar code on the back...covered up by the hologram sticker. Others (like some old ANACS soap slab holders and NGC slabs) were very obvious fakes to me. I politely warned the seller (as I have known him for about 15 years) but he made zero effort to remove them from his table. His excuse was that they were a consignment and not his coins so he wasn't worried about it.
     
  4. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    could you get pictures? Counterfeit ANACS slabs are currently unknown. This would be important information.
     
  5. stldanceartist

    stldanceartist Minister of Silly Walks Supporter

    I will see if he's still trying to sell them next month. I didn't know about reporting serial numbers and cert verification pages being updated - so if I see them in the future, I'll do my best to get photos and report them.
     
    Stevearino likes this.
  6. baseball21

    baseball21 Well-Known Member

    Absolutely absurd take that should be laughed out of the room is more like it.

    Did PCGS not give you high enough grades that started your vendetta against them?
     
  7. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    So you’re not actually going to challenge any of my points?

    I explicitly stated that I don’t have a vendetta with them. It is just my opinion that their response to the counterfeit slab epidemic was insufficient to truly protect collectors, and allowed a situation to go from bad to worse.

    If they come up with an effective solution, I will loudly applaud their efforts. By effective solution, I mean any solution where any collector of any experience can verify to a reasonable certainty that any PCGS-certified coin and slab did indeed pass through PCGS’ hands. Currently, only a fraction meet that criteria.
     
    Last edited: Feb 20, 2020
  8. bradgator2

    bradgator2 Supporter! Supporter

    Do you find a certain price point/coin value at which the fakes appear?
     
    Paul M. likes this.
  9. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    $500 or so, but I have seen fakes of much cheaper coins
     
    Paul M. likes this.
  10. baseball21

    baseball21 Well-Known Member

    Not worth the time on such a crazy take especially when it's already been pointed out to you in the last week or two that they're actually the leader in slab technology and have tried various things in the past seeing what did and didn't work as well as implementing chips starting on the 24th.

    Fake slabs dangers are FARRR overblown on forums anyways. Countless generations of PCGS slabs are insanely easy to tell the fake ones, there's only really one older label that can sometimes be difficult.
     
  11. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    Link? You can make the slab as fancy as you want, but the technology will eventually be copied. Are you aware that PCGS slabs are manufactured in China?

    The simplest and most effective solution would be to do what NGC did and take pics of each and every coin. Why have they not done that?

    Unless I was informed incorrectly, the chips are only applied to Gold Shield holders, which have TrueViews. Oh and an RFID encoder can be had for $800 or so. Sure, it would be much harder to successfully counterfeit these modern slabs (which I applaud), but it does not fix the issue for the average collector and still leaves open the question about the millions of unchipped PCGS slabs.

    Also, for the record, the chip idea was originally mine back in October in a discussion with some big dealers and graders. We discussed how to make it work and be counterfeit-proof, and we eventually came to the conclusion that taking pics would be by far the most effective solution.

    For experienced collectors, sure, but beginners will have a much harder time telling the difference.

    The danger still exists, and collectors are burned every day.
     
    Last edited: Feb 20, 2020
    Troodon, Joe2007, TIF and 1 other person like this.
  12. baseball21

    baseball21 Well-Known Member

    Brett already corrected people about this rumor just this week

    Wouldn't matter anyways the shell is the least important part.

    It's starting with just the Gold Shield since it will be on the other CU companies like banknotes as well and didn't do it all at once logistically, but they plan on having it for all of the slabs by next year/early next year

    I never said it didn't exist, but the actual risk is FARRRRRRR overblown. That goes for any of them. The only way to have 0 risk is to never buy a coin.

    We aren't even close to the we have to avoid this company level, not even the same galaxy as that level of risk. If someone is that paranoid about it then they should just stick to the PCGS Gold Shield with CAC sticker as that is currently the highest security level we have. People really don't need to be that paranoid about it though.
     
    GoldFinger1969 likes this.
  13. green18

    green18 Sweet on Commemorative Coins Supporter

    PCGS is my trusted 'go to' source for collecting of higher priced examples leaching into my collection. As long as I buy the slabs from trusted sources of mine I fear no evil.....

    Yea, though I walk through the valley of the shadow of death, I shall fear no evil.......because I'm the meanest SOB in the valley.
     
  14. Pickin and Grinin

    Pickin and Grinin Well-Known Member

    Alright, I see a little "Fight Club" coming out in the words. Some one wisely asked that the DC threads be tied into an area that was specific to the origin of the type of coin. And poof the DC threads went away,



    I like to think of CT, as a site of Collective Thinking. We do best around here when we put our heads together to and try to think as one. Conversations that are shut down because of 1 train of thought are really a dis advantage to those who are looking to learn.

    I am just wondering, are you an underwriter on any of these company's policy's?
     
  15. Chuck_A

    Chuck_A Well-Known Member

    I'm curious what if anything the major auction houses are doing to prevent counterfeit coins and slabs from being sold in their auctions? I'm not understanding why the US Government cannot or will not take any action against websites like wish.com, Ali Express that sell fake slabs and coins in the US. I understand caveat emptor, however numismatics is a difficult hobby to be in without being a victim of fraud at some point.
     
    Paul M. and GoldFinger1969 like this.
  16. baseball21

    baseball21 Well-Known Member

    Find 5 fake slabs from the major auction houses in the last year and post them. This is no where near the problem the crying wolf makes it out to be.

    What action should that be? Should they divert resources from nuclear material, drugs, people smuggling to try and catch more fake slabs? Should we go to war over and overseas company/site?

    The biggest threat to the hobby are threads like this getting people paranoid and hyped up where they’re seeing perfect faked slabs that don’t really exist.
     
    GoldFinger1969 likes this.
  17. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    Major auction houses represent a very, very small fraction of the whole coin market, and are made up of experts of the highest caliber. This is like saying modern counterfeiting is not a problem because few are seen at a coin show. Yet you have to admit that the influx of Chinese fakes have done damage to collectors and the hobby as a whole. Counterfeit slabs are no different. More and more are getting introduced into the market every day. Saturation levels might not be worrisome to you today, but how about 5 years from now?

    eBay, flea markets, etc. do not have expert filters, and fake slabs are far more prevalent there than you would like to admit. To a novice, they would not be able to tell, and if there is no way to verify the coin inside as legit, then they would be none the wiser.

    The grading services aim to protect collectors of all levels of experience, particularly the ones with low experience/knowledge. However, PCGS’ decisions have put those very people at risk.
     
  18. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    Yet.

    Being paranoid is better than being ignorant. You seem to prefer people to be ignorant and unaware so that they would not know to criticize PCGS when such criticism is rightfully due
     
    Troodon, TheFinn and GoldFinger1969 like this.
  19. TypeCoin971793

    TypeCoin971793 Just a random nobody who doesn’t know anything...

    for raw coins, sure, but this is about certified coins, so your comment is irrelevant.

    The only way to avoid fake slabs is to only buy ones that can be photo-verified. That includes NGC coins and any PCGS coin that has a TrueView. One should avoid buying any other PCGS-certified coin unless the dealer guarantees his wares or they are comfortable with their authentication ability.

    Yet. You are looking at the now, I am looking 5+ years ahead. NGC looked ahead and took appropriate action. PCGS has failed to do so.
     
  20. baseball21

    baseball21 Well-Known Member

    For someone that gives presentations at coin shows I really would expect a much more honest and intelligent discussion. Instead we get this.......

    Not worth the time when someone wants to try and unduly bias people (won't make any bit of difference in the market aside from misleading some people who don't know better) especially when it's against everything in the market but so be it that's on you

    Legitimately hysterical you're trying to bring down PCGS (when you were wrong about more than one thing) and aren't mentioning that by your own standard ANACS and ICG should never be used under any circumstances.
     
    Last edited: Feb 21, 2020
    GoldFinger1969 likes this.
  21. ldhair

    ldhair Clean Supporter

    Nice job of putting this together.
     
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