BlackRock Issues Refutation Of SLV Fraud Allegations; Is It Time To Panic For SLV Holders?

Tyler Durden's picture

That over the past few years there has been a substantial push to expose some of the chicanery at the SLV iShares silver ETF, especially among the non-indoctrinated blogosphere, is no surprise. After all fear of a massive paper silver wipe out is not only the reason for success of Eric Sprott's physical silver ETF, but for the massive and consistently record premium over NAV of the PSLV. Yet up until now, we were not all that concerned about such allegations (despite having written about this ourselves on several occasions). After all, the one thing that would essentially validate such, at time exorbitant, allegations, was missing: a formal refutation. That is, until now. Kevin Feldman, a Managing Director in the iShares unit of BlackRock, has just blasted out the following email which we were lucky enough to become privy to. Basically, we now have the one and only thing we were missing: an official denial of all the "rumors." It may now be time to abandon the SS SLV, because if this letter is the best defense iShares can muster, then SLV holders may be in trouble. But better confirmation than. And leaving the content of the letter aside, its existence, and that BlackRock itself is willing to engage the tinfoil hat clad blogosphere, is the biggest red flag so far...

What’s in the iShares Silver ETF?  Silver.
By Kevin Feldman

Leased silver?  Derivatives?  Phantom silver?

No, no and no.

I’ve seen a lot of comments like the one following this Seeking Alpha post, speculating on the various ways that iShares Silver Trust (SLV) investors could find themselves holding something other than the silver bullion they’d expect.

Every investor interested in buying SLV should first read its prospectus, particularly the Risk Factors section on pages 7-11.  You will see the risks involved with an investment in SLV, including the potential for losses and liquidity risks.

What you won’t see are risk factors around SLV holding derivatives, i.e. silver futures, BlackRock or the trust custodian leasing SLV’s silver(the trustee is authorized to sell silver in the smallest amounts required in order to pay expenses), or SLV not holding sufficient silver to correspond to all shares outstanding, all of which SLV is not permitted to do under its prospectus or current legal structure. 

At BlackRock, we take the responsibility of protecting shareholder interests very seriously and spend a lot of time constructing our iShares products to help ensure they meet investor expectations.  In the case of SLV there are multiple safeguards in place.  For one, it’s structured as a grantor trust, which means the trust (on behalf of its shareholders) has the legal right of ownership to the silver it holds.  JPMorgan Chase Bank, N.A., London branch, provides custodial services for storing the silver, but has no legal rights to SLV’s silver holdings.  Investors can see the serial numbers of all the silver bars in the trust here and can review an independent audit of the trust’s silver here.  (See chart showing total shares outstanding vs. total ounces of silver in the trust below).

Source: BlackRock 4/28/06 (launch date) – 4/1/2011

Another concern revolves around ETF creation and redemption.  I’ve gathered from many posts and comments that there is a misunderstanding about the role of Authorized Participants who facilitate trading in SLV through the creation of new shares when demand is high.  Creating new shares does not expose existing SLV shareholders to some new mysterious risk.  During the creation process, the AP exchanges physical silver for new shares, which are issued by Bank of New York Mellon (SLV’s trustee) on behalf of BlackRock Asset Management International Inc. (the trust’s sponsor).  SLV’s trustee and custodian ensure proper receipt of the silver before new SLV shares are released.

I recognize we live in a skeptical time, especially following the events of 2008, and it’s smart to question whether your investments are doing what you think they should be doing.  One of our key tenets here at iShares is transparency, which means we make every effort to educate potential investors on how each ETF works and what it holds.  In the case of SLV, it’s a very straightforward answer: silver.

iShares Silver Trust (the “Silver Trust”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus and other documents the Silver Trust has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting or EDGAR on the SEC website at Alternatively, the Silver Trust will arrange to send you the prospectus if you request it by calling toll-free 1-800-474-2737.

Investing involves risk, including possible loss of principal. The iShares Silver Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act.  Shares of the Silver Trust are not subject to the same regulatory requirements as mutual funds. Because shares of the iShares Silver Trust are expected to reflect the price of the silver held by the Silver Trust, the market price of the shares will be as unpredictable as the price of silver has historically been.  Additionally, shares of the Silver Trust are bought and sold at market price (not NAV). Brokerage commissions will reduce returns.

Shares of the Silver Trust are created to reflect, at any given time, the market price of silver owned by the trust at that time less the trust’s expenses and liabilities. The price received upon the sale of shares of the Silver Trust, which trade at market price, may be more or less than the value of the silver represented by them. If an investor sells the shares at a time when no active market for them exists, such lack of an active market will most likely adversely affect the price received for the shares. For a more complete discussion of risk factors relative to the Silver Trust, carefully read the prospectus.

Following an investment in the iShares Silver Trust, several factors may have the effect of causing a decline in the prices of silver and a corresponding decline in the price of the shares. Among them: (i) A change in economic conditions, such as a recession, can adversely affect the price of silver. Silver is used in a wide range of industrial applications, and an economic downturn could have a negative impact on its demand and, consequently, its price and the price of the shares. (ii) A significant change in the attitude of speculators and investors towards silver. Should the speculative community take a negative view towards silver, a decline in world silver prices could occur, negatively impacting the price of the shares. (iii) A significant increase in silver price hedging activity by silver producers. Traditionally, silver producers have not hedged to the same extent as other producers of precious metals (gold, for example) do. Should there be an increase in the level of hedge activity of silver producing companies, it could cause a decline in world silver prices, adversely affecting the price of the shares.

The amount of silver represented by shares of the iShares Silver Trust will decrease over the life of the trust due to sales necessary to pay the sponsor’s fee and trust expenses. Without increase in the price of silver sufficient to compensate for that decrease, the price of the shares will also decline, and investors will lose money on their investment. The Silver Trust will have limited duration. The liquidation of the trust may occur at a time when the disposition of the trust’s silver will result in losses to investors.

Although market makers will generally take advantage of differences between the NAV and the trading price of Silver Trust shares through arbitrage opportunities, there is no guarantee that they will do so. There is no guarantee an active trading market for the shares, which may result in losses on your investment at the time of disposition of your shares. The value of the shares of the Silver Trust will be adversely affected if silver owned by the trust is lost or damaged in circumstances in which the Silver Trust is not in a position to recover the corresponding loss. The Silver Trust is a passive investment vehicle. This means that the value of your shares may be adversely affected by trust losses that, if the trust had been actively managed, might have been possible to avoid.

Shares of the iShares Silver Trust are not deposits or other obligations of or guaranteed by BlackRock, Inc., and its affiliates, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

BlackRock Asset Management International Inc. (“BAMII”) is the sponsor of the Silver Trust. BlackRock Fund Distribution Company (“BFDC”), a subsidiary of BAMII, assists in the promotion of the Silver Trust. BAMII is an affiliate of BlackRock, Inc.

Although shares of the iShares Silver Trust may be bought or sold on the exchange through any brokerage account, shares are not redeemable except in large aggregated units called Baskets.

When comparing commodities and the iShares Silver Trust, it should be remembered that the sponsor’s fee associated with the Trust is not borne by investors in individual commodities. Buying and selling shares of the iShares Silver Trust will result in brokerage commissions. Because the expenses involved in an investment in physical silver will be dispersed among all holders of shares of the Silver Trust, an investment in the Silver Trust may represent a cost-efficient alternative to investments in silver for investors not otherwise able to participate directly in the market for physical silver.

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MaxVernon's picture

oh well, everything is perfect then!

MaxVernon's picture

hey, at least I didn't say "silver bitches".


D'oh, I just did!

tekhneek's picture

If you're the first person to post, make it worth the keystrokes god damn it.

SILVER, BITCHES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

justbuygold's picture

I thought JP Morgan's vaults were full 8-12 months ago.  They ran out of vault space. I think its limit was 400 tons.  So exactly where is all excess silver being stored .

Of course its true that JP Morgan may not as custodian have any " legal rights " to the silver ( just like they had no legal rights to issue fraudulent mortgage documents).  However that doesn't and won't stop them from using all that inventory as an excuse with Comex that they are just hedging inventory/positions .

Funny how this story suddenly comes out when silver is up over $2 today.  You would think they would publish this story at a time when silver was crashing and there were rampant negative rumours . At that point they would want to protect their SLV franchise.

Yes, this looks like an extremely desperate attempt to stop what is an uncontrollable short squeeze on an massive uncovered short position.






Careless Whisper's picture

JPMorgan Chase Bank, N.A., London branch, provides custodial services for storing the silver


best belly laugh i had all day.

What does it all mean's picture

Well, here is a well written retort on all this Silver is scarce argument, yet people don't believe it.  It's like showing you an autopsy report and yet you are still claiming murder.  In that case, there really isn't any fact or proof necessary.  

All the silver bull's foundation is based on rumors and mass hysteria.  BNY/Ishares are trying to pop the bubble before it is too late....  

It is too late.  Good luck to all. 

outamyeffinway's picture

The "report" said JFK was shot with one bullet.

The "report" said that building 7 was on fire and collapsed due to the "fire", according to "the report".

spastic colon's picture

I like that! I think a good way to go by is to do the exact opposite of what the globalists and banksters spout off. I am riding this bull for awhile. Bought 3 more ounces today at 47.25 each. Silver bitchez!

Careless Whisper's picture

Are you talking about the "report" that he links to from Inspectorate International Ltd. ?  Ya think they're opinion is as good as a AAA from Moody's?

Bendromeda Strain's picture

Thank you for that. I hope all is well with PM.

akak's picture


All the silver bull's foundation is based on rumors and mass hysteria.

Again, ??????????

RockyRacoon's picture

Hey, akak, found this article on the Hunt Bros. that I think you'll like:

How the Hunt Brothers Capped Gold…Yes, Gold
April 18, 2011 - By Michael Maloney
I’ve studied the Hunt Brothers, and I have a different take on what happened. Because of the way they flaunted wealth, because of ties to the Middle East, and because they invested heavily in silver, the Hunt brothers were perfect scapegoats.

akak's picture

Thanks Rocky!  Read that one already, lol.

Interesting premise, though.  I have always bristled at the glib (and incorrect) assertion by so-called mainstream analysts that the Hunts were evil speculators, and got what was coming to them.  I am STILL learning the vile extent of the criminal actions taken against them by the US government by changing the rules in the middle of the game, and wildly tilting the table against them to defend our POS fiat currency.

Pegasus Muse's picture

Someone suggested this documentary yesterday:

The Money Masters:  How the Bankers run the United States and the World  

I've watched a third of it so far.  Highly recommended.  Does a great job showing how evil banksters insinuate themselves into governments, encourage wars (gov't indebtedness), and take out opponents (assassinations, etc).  The Rothschild family covered in depth.  The sordid history of the central banking in the US discussed. 

SWRichmond's picture

It's like showing you an autopsy report and yet you are still claiming murder.

Not quite.  What it's really like is when you react with a great deal of skepticism when a proven liar tells you that they haven't lied, and they aren't lying to you now.  Putting the lies in writing doesn't make them any more crdible.  Hell, in 2011 America, swearing to lies in court and submitting "evidence" you know to be false doesn't even get you prosecuted if you're a bankster or a bankster attorney and the person you're cheating is one of the unwashed.

knukles's picture

Was the person dead when the autopsy was performed?

tmosley's picture

Yeah, except we saw the body, and it was full of bullet holes, and chopped up into little bits.

The silver bull market is based on fundamentals.  Fundamentals like, I don't know, 5000 year lows in silver inventories, burgeoning industrial uses, and dollar debasement.

But hey, you just hold onto your precious paper.  I'm sure it will make fine kindling for a night's fire.

Cognitive Dissonance's picture

Well, here is a well written retort on all this Silver is scarce argument, yet people don't believe it.

Well written retort? Are you referring to the Blackrock "retort" above? Really? Because after reading it twice, then reading it a third time just to make sure I didn't somehow miss something, I don't see where this "well written retort" refutes much of anything.

It's basically a recital of the prospectus including direct quotes pulled from the prospectus. It doesn't respond to the most serious allegations made by the so called "silver bull's foundation". Blackrock's argument is standard boiler point rhetoric and mostly doesn't even acknowledge the specific allegations other than to say here are the serial numbers and here is the Seeking Alpha article and we are telling the truth. Oh and by the way, we guarantee nothing.

Try again.

DaddyO's picture



CD, you must have read the same post that I read! It says "nothing", absolutely nothing to refute anything regarding the fraud being perpetrated by SLV.


knukles's picture

The elegant retort, indeed proof positive, would simply entail shifting all of said silver, said to be physically present against which there are no encumbrances, currently held as unallocated LBMA good delivery bullion, to....

....a formal allocated, unencumbered status...

....which should be of no consequence as the bullion held is said to be physically present but simply unallocated and unencumbered.

Right, Knukles!

Listen up Larry, I'm tryin' to help ya' here.

knukles's picture

Moreover, if BlackRock were actually administering this pool in it's shareholder's best interests, they would immediately shift the holdings to a fully allocated unencumbered status so as to immediately capture a significant premium to spot similar to that enjoyed by Sprott Physical Silver Trust holders.


RockyRacoon's picture

CD, let's just acknowledge that it's a "feel good piece" written for those already neck-deep in the trade.   They can skim the thing and feel secure.   Ain't it all about cognitive bias anyhow?

Piranhanoia's picture

No, really. It was breathing and everything before we started. We checked!

MrBoompi's picture

I might believe the prospectus if I hadn't read it. It's got more holes than a ton of swiss cheese. None of the three parties seem to be responsible for anything except making sure enough silver is sold to cover the trust's expenses. If you can't see buying metal is safer than iShares you're pretty supid really.

Big Ben's picture

It's like showing you an autopsy report and yet you are still claiming murder.

It is like seeing an autopsy report written by the person suspected of the murder.

Re-Discovery's picture

Have fun with silver stocks.  Take 'em out, spend some money on 'em, pretend to love them for a few hours.  But never, never marry them!

Always come home to physical.  That's who you'll build your future with.

tomster0126's picture

Exactly, the more fiat your holdings are the more they're bogus for the future.  i'm keeping gold and silver physical for as long as I can.

SRSrocco's picture


SLV NAV = -2.43%

PSLV NAV = +22.29%

There is almost a 25% difference in the premium in Net Asset Value when you compare Sprotts Silver ETf to iShares SLV ETF.  Time to get into bullion and out of paper

tiger7905's picture

Funny how SLV has never complained about how hard it is to get silver for their trust like Sprott has. I guess Sprott just doesn't know where to buy it. :-)

SWRichmond's picture

Now that's some funny shit right there!

Hephasteus's picture

I don't care who you are. That shit'll give you the hysterical giggles right there.

akak's picture

When you consider the irony of your statement, it is truly comical that anyone gives ANY credence to the claims of integrity of the SLV.

Hephasteus's picture

They got a line on a really good downhill willy supplier.

Running a business on a mountaintop is hard. We got no phone. The only way to get here is by plane so we got no walk in business.

SWCroaker's picture

It was a funny comment, but misses the fact that the two funds have different share creation systems.  PSLV sells shares en masse and uses proceeds to place orders for bullion.  Then PSLV has to wait for counterparties to deliever.  SLV is *supposed* to exchange a block of shares when an AP shows up with bullion essentially in hand.  So SLV would never "have difficulty" obtaining the bullion, since they aren't supposed to issue new shares in exchange for a promise of bullion.


The utter lack of transparency about the share creation process of SLV, and the associated irregularities in bullion quantity are one of the main points of concern by the bloggers. 

Big Ben's picture

If I had some silver bullion, why would I exchange it for SLV shares? PSLV is selling at a large premium to NAV, so wouldn't they be able to pay me more for it than I would get from selling the SLV shares?

Vendetta's picture

Sprott was just trying to get 25 million ozs right?  A billion dollars worth at todays prices.

Manzilla's picture

It would be funnier if Kevin Feldman said that!

Pegasus Muse's picture

"Investors can see the serial numbers of all the silver bars in the trust here and can review an independent audit of the trust’s silver here."

I was able to open the Bar List.  The Audit file (.pdf) didn't open.  The error message says it is corrupted.

Anyone else having any luck viewing it?

D1eeeeeNAHHHHH's picture

Does anyone have suggestions on what could replace calls on SLV that tracks silver that may be a safer underline security?

Sancho Ponzi's picture

Do you think it is a coincidence that this email was released just a few days after UT takes delivery of $1 billion in gold bullion? 

Me think not.

Bastiat's picture

Great info as usual, TD.

slaughterer's picture

 JPMorgan Chase Bank, N.A., London branch, provides custodial services for storing the silver..


4xaddict's picture

Just dotting their I's and crossing their T's to show that "they had no idea of JPM's horrible fraud" when it all goes tits up in a ditch