Are those rare coin offers too good to be true? What do you think?

April 28, 2014, 1:00 PM UTC

FORTUNE — It’s a time-honored practice. From X-ray spectacles in comic books to back-of-the-magazine touts for “male enhancement” pills and weight-loss programs with highly optimistic claims, certain publications have always included a few advertisements for products that, were they investments, might be called “speculative.”

Last month a full-page advertisement in USA Today caught our attention. It featured a photo of an attractive, “valuable” Indian Head nickel from 1935. “Everyone is rushing” to get their hands on “rarely seen” coins (in “vault bags”), according to the promotion. At just $59 a bag, the deal is a “real steal” because “just one scarce Indian Head” coin could be worth “hundreds of dollars.” The promotion expired in 48 hours, and the company’s phones “are ringing off the hook,” the ad explained.

Our interest was piqued. We at Fortune figured our readers would be curious what sort of riches awaited, and clearly there was no time to lose. We dialed the “national hotline.” A salesperson explained that, of course, she couldn’t offer any guarantees, but the market value of the coins could have already increased 70%. How’s that’s for a return? She was also quick to offer an additional opportunity: 100 wheat pennies for just $19. That was too enticing to pass up. After paying for shipping and handling, our purchase came to $89.

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Two weeks later, a box arrived. Inside were 18 Indian Head nickels and 100 wheat pennies in sealed plastic bags (the “vault bags”), along with two blue velveteen pouches inscribed with the golden seal of the World Reserve Monetary Exchange. We were ready to, er, cash in.

Alas, readers will be disappointed to learn that our hopes were dashed. We brought the coins to Norman Scrivener, a consultant appraiser at the Doyle New York auction house, and asked him to put a price on our collection. He estimated the value as roughly $6.50 — less than a tenth of what we paid. “I am 99.9% sure that no one is going to find a rare coin in one of these bags,” Scrivener says. He explained that the condition of each coin — including the ability to be able to read the year the coin was issued — is crucial to its value. Nearly all of our nickels have significant wear and half have illegible dates.

Surely, our experience must’ve been unusual, right? Well, it all depends on what your definition of “unusual” is. The World Reserve Monetary Exchange is an “Approved Bulk Coin Purchaser of the U.S. Mint,” according to the company, despite having previously run afoul of the Mint. It has also been on the receiving end of legal actions by two states and amassed more than 200 complaints with the Better Business Bureau about the quality of the company’s coins and the accuracy of its advertisements. Its parent company was reportedly searched by the IRS two years ago.

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In 2007, the Minnesota Commissioner of Commerce issued a cease and desist order after World Reserve placed an ad in the Minneapolis Star-Tribune offering rolls of uncirculated nickels. The ad claimed that in previous years similar items had increased in value by as much as 1,098%. The order was withdrawn after World Reserve agreed to change the wording of its advertisements to make it clear that it did not guarantee any return.

Prosecutors in Santa Cruz, Calif. sued World Reserve in 2009 over allegedly deceptive advertising that claimed customers would receive “free” coins despite having to make an initial purchase, according to assistant prosecutor Kelly Walker. The company agreed to pay $223,500 in civil penalties and costs to settle the case, according to court documents.

World Reserve no longer sells products to residents living in either Minnesota or California, which was a “difficult business decision,” according to Kimberly Raines, who is World Reserve’s corporate secretary and an in-house counsel for the company.

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The scrutiny of World Reserve reached the federal level as well. In February 2012 the IRS executed a search warrant at the Ohio offices of its parent company, Arthur Middleton Capital Holdings. A local news outlet, the CantonRep, reported at the time that lawyers for the company had shared the search warrant with the publication and that it indicated that World Reserve was the subject of the search. The Arthur Middleton lawyers were quoted as characterizing the IRS’s move as an overreaction. Neither the IRS nor Raines would comment.

In 2009, the U.S. Mint, the federal agency that manufactures American currency, sent a cease and desist letter to World Reserve, arguing that its advertisements gave the false impression that the Mint endorsed and approved the company’s coin dealings. Today, the bottom of World Reserve’s promotions state that the company is not associated with the Mint. The text also notes that coins are not guaranteed to increase in value and that dissatisfied customers can return their purchases.

In an emailed statement, World Reserve’s Raines asserted that “within the past five years, the U.S. Mint has expressed absolutely no concerns with our advertisements … [I]t is our understanding that we are one of the top five largest purchasers of coins from the U.S. Mint in the country.” (According to Mint spokesman Tom Jurkowsky, World Reserve bought more than $2.6 million in coins from the Mint in 2013.)

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Raines asserted that the Better Business Bureau’s complaints don’t reflect the “overwhelming satisfaction of its customers” and noted that the company has shipped 12.5 million items in recent years with only a minuscule fraction generating complaints. In addition, World Reserve “would like to review the support for [the appraiser’s] valuation of the vault bag.” The company categorized Fortune’s reporting as “false, incomplete, and often year old complaints [sic], misleadingly accumulated and packaged for your audience …”

Some customers continue to feel slighted. In January 74-year-old Robert Burdick responded to a World Reserve advertisement for “rarely seen” Indian Head nickels in his local Pennsylvania paper. He ordered four bags for $272 only to be disappointed, he says, that many were so worn that he couldn’t read the dates or see most of the designs.

There was no point to getting them assessed by a coin collector, he says. “Would you take trash to an art dealer?” asks Burdick. “I wouldn’t waste his time.” He figures the collection is barely worth $10 — roughly 1/27 of what he paid. “The impression was that these were pretty rare coins in collectible condition,” Burdick says. “I thought maybe I’d be able to add to my coin collection with a huge lot of new items.” After he complained to World Reserve, the company offered Burdick a refund, which he declined.

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World Reserve says in a statement that customers generally enjoy the bags of coins for other reasons. “There is no way to tell which coins are in the bag or the collector value of such,” the company states. “And, our customers enjoy the excitement from searching through the many coins in the bag” as it brings up “fond memories of the coins from their youth.”

For those who want more than fond memories, appraiser Scrivener has some advice. “Whether you are collecting paintings or autographs of presidents or coins, it is up to you to do the research to learn about the hobby,” he says. “If it sounds too good to be true, you need to talk to professionals before making a purchase.” In the meantime, we’ve got our $6.50 worth of coins. If we throw in another $1.49 in cash, we can use the combined sum to buy a pair of X-ray specs.



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