How much is an elephant's weight in gold worth? The U.S. Marshals Service could soon find out when it auctions off nearly five tons of confiscated gold and silver jewelry Tuesday in Texas.
The bulk lot includes more than 40,000 ounces of mixed-carat gold jewelry, and over 100,000 ounces of silver baubles, valued at over $60 million.
So far, just over half a dozen bidders have registered for Tuesday's auction through Gaston & Sheehan Auctioneers in Texas. Registration for the sale closes Friday, and requires a $100,000 refundable deposit.
The winning bidder will be notified on Tuesday and will then have three days to come up with the cash and pick up the loot.
"The gold market has been in our favor for quite some time," explained Jennifer Crane, assistant program manager for operations with the US Marshals Service Asset Forfeiture Division. "The significant, astronomical rise in the past two years has led us to this point where gold is at an all-time high and it will only help strengthen our sale on Tuesday."
Representatives for one of the bidders were on hand to view the massive haul on the first day of auction previews at a warehouse in an undisclosed location in Texas, under extremely heavy security. The Marshals are previewing the goods through Thursday, strictly by appointment for registered bidders.
The jewelry represents the spoils of a money-laundering probe dating back to 2000 involving front companies that funneled cash from drug sales in the U.S. through a pair of wholesale jewelry businesses in Panama. These did nearly $100 million in business annually, according to investigators.
The case marked the first U.S. indictment of offshore businesses for money laundering. The principals in the two companies pleaded guilty to the charges in a federal court in New York.
The Marshals Service sold off the more valuable individual pieces of diamond, emerald and precious stone jewelry seized in the case and will be auctioning off the remaining 500,000 pieces of gold and silver rings, necklaces and bars of melted-down silver in one giant lot.
With precious metal prices near record highs, the auction is expected to be the government's largest-ever single forfeiture sale.
Lou Grasso, a gold trader with Millenium Futures, says the gold will likely go for a discount.
"If they're estimating the value of the actual gold content to be $50 million, "I'd expect it to sell at no more than $40 million or $42 million," he said.
Anthony Neglia, president, Tower Trading, said the winner has several options of what to do with the loot, including melt it down.
"If jewelers feel it's a quality piece, they'll re-price it, clean it up, repair it and sell it, or they melt it and create something else with the gold," he said.
The US Marshals Service's Crane also helped oversee the auction of convicted Ponzi schemer Bernard Madoff's belongings in 2009, which netted nearly $1 million from the sale of his custom made shoes, jewelry and other contents of his New York penthouse and Montauk beach home.
For the jewelry auction "we had to think about what's the best way to package it, what's the best way to present it, what's the best way to protect it," Crane said. But with the Madoff assets "we couldn't use the appraised value because there was an intrinsic worth to what he owned, that people would pay anything for" his belongings.
Ponzi Auctions: Florida Nightclub, Madoff Wine
The U.S. Marshals Service estimates it currently holds more than 18,000 seized assets for sale, with a value of about $4 billion.
Some of this month's listings on its forfeiture sale website read like the results of an eBay search for high-priced Ponzi Scheme booty.
In Florida, the Marshals are accepting bids this month in a separate auction on a Fort Lauderdale-area nightclub seized from former Florida attorney Scott Rothstein, sentenced to 50 years after pleading guilty to five counts of fraud last year in connection with a $1.2 billion Ponzi Scheme.
The Cafe Iguana Pines is valued at $1.4 million, and is described as a popular nightclub with several dance floors and eight separate bars with big screen TVs for viewing sporting events.
That auction closes May 25 and can be previewed here.
Bernard Madoff's wine collection is being sold in an online auction through Morrell Company Fine Wine Auctions. Among the most valuable lots is a case of 1982 Chateau-Lafite-Rothschild, currently bid at $50,000. That sale closes May 18.
The contents of Madoff's Palm Beach residences are due to be auctioned next month.
Maddoff is currently serving a 150-year sentence in connection with a massive $50 billion Ponzi scheme. The sale of his homes in New York and Palm Beach netted roughly $23 million which was used to help compensate his victims.
A trophy home seized from a so-called mini-Madoff up for sale this month could bring in much more.
Park Avenue Duplex: For Sale By Government
The Marshals Service is asking $28 million for a Park Avenue apartment seized from former Democratic Party financier Hassan Nemazee, who is serving 12 years after pleading guilty to a Ponzi scheme that netted nearly $300 million in fraudulent loans.
While Nemazee's case may have paled in comparison to Maddoff's fraud, the 14-room luxury duplex at 770 Park Ave. has a much higher pedigree in Manhattan's high-end real estate circles. Madoff's Upper East Side penthouse, with an address one block over from Park Avenue, sold for a comparatively modest $8 million.
The price tag and the notoriety of the property will surely be a test of the New York real estate market. Proceeds of the apartment sale will be used to compensate victims, as will proceeds from the Madoff and Rothstein Sales.
As for that five tons of gold and silver being auctioned Tuesday, there are no individual victims. Money raised will be used to fund law enforcement efforts.