On June 29, 2020, Caixin Global reported a shocking trail of fraud that resulted in one of China's largest loan scams in history. Nasdaq-listed Kingold Jewelry, one of China’s largest jewelry makers, is alleged to have used 83 tonnes of fake gold bars as collateral to secure 20 billion yuan (US$2.83 billion) of loans from onshore lenders.
According to the Caixin report, the allegedly fake gold bars first came to light when Kingold failed to pay interest to one of its lenders, Dongguan Trust, late last year. When the lender tried to liquidate Kingold’s collateral to cover the defaulted debts, the gold bars turned out to be just gilded copper alloy upon testing.
To put the scale of this fraud into perspective, if the fake gold bars were actually real they would have:
- represented a market value of US$4.75 billion
- equaled about 22% of China's annual gold output in 2019
- composed roughly 4% of China's state gold reserves in 2019
The scale of this alleged fraud that Kingold is being accused of is simply staggering....Fraud of this magnitude needs some type of enabling like a lax regulatory environment or compliance, and/or favoritism and corruption, - Ed Moy, former director of the U.S. Mint
Maybe it's time to #DropGold?
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