Banking on a Bluff: The Biggest Gold Scam in Modern History

The comments below are an edited and abridged synopsis of an article by Marin Katusa

Gold has been on a tear and has broken above $1,800. Every goldbug is excited, but not a group of bankers who got caught up in the greatest modern-day gold racket. For them, their gold bars aren’t worth $1,800 per ounce, but more like $2.75 per pound.

Banking on a Bluff: The Biggest Gold Scam in Modern History
Gold ingots on a white background with magnifying glass

Katusa discusses the Chinese Kingold scandal and asks, is this con a stand-alone crime, or is it part of a commonplace scheme? How many other loans from how many other companies are built on fake collateral? And the true elephant in the room: How much of China’s gold reserves are gold plated?

In 2016, a similar gold fraud case occurred in China. A $2.8 million loan backed by gold as collateral turned black… tungsten black, in fact.

When the loan was defaulted on, the financial institution involved, Tongguan Co-Op, found that the bars pledged for that loan were actually only 36.5% gold. Tungsten plate was found underneath the gold veneer. Tongguan would go on to discover 46 tons, or 1.5 million ounces, of fake gold on its balance sheet.

This single bad loan led to the discovery of fake gold in the coffers of 19 different lenders throughout the Shaanxi and adjacent Henan provinces.

The total amount of compromised collateral was worth $2.7 billion—the largest gold fraud scandal in China before the Kingold affair.

Gold is at an all-time high right now as investors look for a solid footing in insecure times. But gold is only good if it’s truly good as gold. Be careful where you purchase your bullion and how you invest.

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