Self-Directed IRA Fraud: What Custodians Do and Do Not Check

A self-directed IRA lets you hold assets that most IRAs do not, such as real estate, private deals or precious metals. That freedom comes with a catch that many savers do not know about. The company holding your account is not checking the investment for you. This page explains what regulators say custodians do and do not do, how fraudsters use the confusion, and what you can do about it.

It is a general explainer, not advice about any investment or company.

What does a self-directed IRA custodian actually do?

A custodian is the company that holds your IRA and handles the paperwork. The Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA) and the Financial Industry Regulatory Authority (FINRA) issued a joint investor alert on February 7, 2023. It says the custodian's role is limited to holding and administering the assets in the account.

The alert lists three things self-directed IRA custodians do not do. In its words, they do not:

• "sell investment products or provide investment advice";
• evaluate the quality or legitimacy of the investment or its promoters; or
• verify the accuracy of the financial information provided for an investment in the account.

The alert adds that custodial agreements typically say the custodian is not responsible for investment performance. FINRA's copy of the alert carries the same custodian guidance.

Does using a legitimate custodian make an investment safe?

No. The regulators say it directly: "Using a legitimate custodian to buy an investment DOES NOT make that investment legitimate."

This matters because a seller may point to the custodian to build trust. The alert warns that fraudsters may falsely claim or suggest that custodians investigate and validate investments. Hearing that a well-known custodian "approved" or "will handle" a deal is not evidence the deal is real.

What are the red flags of self-directed IRA fraud?

The alert names several patterns. In plain terms:

• A fake custodian. A fraudster may use a bogus custodian to collect your money.
• A false claim about custodians. Anyone who says a custodian checks or vouches for the investment is describing something the alert says custodians do not do.
• An unsolicited offer. The alert urges great caution with unsolicited offers to move money from a traditional IRA or other retirement account into a new self-directed IRA.
• Guaranteed returns. The alert says claims such as "risk-free," "zero risk," "absolutely safe" and "guaranteed profit" are hallmarks of fraud.
• An unlicensed promoter. Promoters might not be licensed investment professionals, so they may face less oversight.
• Little information. Alternative investments may come with limited information and trouble selling (illiquidity).

The alert also points out that a tax-deferred account can encourage people to look at it less often. That can let a fraud continue longer.

Are the values on my statement proof the investment is real?

Not necessarily. The alert recommends checking account values independently, for example with a third-party valuation or tax assessment records, instead of relying only on figures the promoter supplies. Because custodians do not verify financial information about an investment, a statement value may simply repeat what the promoter reported.

This applies to any asset in a self-directed account, including physical metals. For gold and silver, ask how the metals are held and who can confirm they exist. Our guides on how to verify a dealer and warning signs of gold IRA scams cover metals-specific checks.

How can I check a custodian?

The regulators suggest confirming the custodian is legitimate. For nonbank firms, the IRS keeps a list of approved nonbank trustees and custodians. The IRS page says these entities are approved under Treasury Regulation Section 1.408-2(e), and that the list is updated as firms are added or removed. The page, which was last reviewed on June 28, 2026, describes listed firms only as "approved" under that regulation and makes no statement about endorsing them.

The regulators' alert also says this list is not comprehensive and that you should research any custodian that is missing from it. Being on the list tells you about the firm's IRS approval status. It does not tell you whether a particular investment sold to you is sound.

What else should I ask before investing?

The alert recommends these steps:

1. Ask whether the person and the investment are registered or licensed, then check the answer with the SEC, FINRA or your state securities regulator.
2. Research the promoter before you invest.
3. Be skeptical of guaranteed or unusually high returns, especially with little or no risk.
4. Get a second opinion from a licensed, unbiased investment professional or an attorney, and talk to a tax advisor about IRS rules.
5. Review the SEC's "Five Questions to Ask Before You Invest" (we did not open that page for this article).

Why do the IRS rules matter in a self-directed IRA?

Self-directed accounts carry tax rules on top of fraud risk. The IRS prohibited transactions page describes prohibited transactions as "certain transactions between a retirement plan and a disqualified person." For IRAs, the page says disqualified persons include the owner's fiduciary and certain family members.

It also says that if the owner or a beneficiary engages in a prohibited transaction involving the IRA, "the account stops being an IRA as of the first day of that year." The account is then treated as having distributed all its assets at fair market value on that day. Details depend on the facts, so see our prohibited transactions guide and talk to a qualified tax professional. The regulators' alert also lists noncompliance with the complex tax rules as a risk: extra taxes, penalties or loss of tax-deferred status.

What does this mean for gold and silver IRAs?

The regulators list precious metals among the assets a self-directed IRA can hold. So the same limits apply. A gold IRA company usually works with a separate custodian. The custodian's role, as the alert describes it, is holding and administering. It is not confirming that a dealer's prices, claims or promises are fair or true.

That does not mean every gold or silver IRA offer is a fraud. It means that costs, fees, the dealer's pricing and any promised results are things you check yourself or with a qualified professional. See gold IRA risks and gold IRA fees for what to look at.

Where do I report self-directed IRA fraud?

The alert lists these options:

• The SEC: submit a tip at sec.gov/tcr.
• Your state securities regulator, which you can find through NASAA's website.
• The SEC Office of Investor Education and Advocacy: 1-800-732-0330.
• FINRA: a tip or complaint through finra.org.

For precious-metals offers specifically, see how to report gold IRA or precious metals fraud.

What we did not check

We read the 2023 joint alert on Investor.gov and FINRA (through page summaries, so only short quotes are used), the IRS prohibited transactions page and the IRS approved nonbank custodians page on October 28, 2026. We did not open the SEC's "Five Questions" page or the list of approved nonbank custodians itself. The alert is from February 2023 and may have been updated since. We did not review any specific custodian, company or case.