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World News See other World News Articles Title: Wuhan company now at the center of one of the biggest fake gold scandals Wuhan company now at the center of one of the biggest fake gold scandals A Wuhan-based company is accused of using fake gold to obtain more than $4 billion in loans By Hollie McKay Fox News Published June 30, 2020 3:57pm EDT Christopher Wray on espionage threat from China, investigation of violent extremists, internal problems at FBI The city of Wuhan, China, is hitting the headlines again – this time as the place of origin for what could be one of the largest gold counterfeiting scams in recent times. According to multiple industry reports published this week, the Wuhan-based, NASDAQ-listed Kingold Jewelry issued 83 tonnes of alleged gold -- valued at $4.2 billion and the equivalent to 22 percent of the country's gold -- as collateral to obtain loans from at least 14 Chinese money lenders and trust banks. Except the "gold" in the bars is suspected of being gilded copper. "This is hardly surprising; most of the fakes we see in our business are coming out of China," Michael Wittmeyer, a gold expert for JMBullion.com. "There are replica products of what we sell online, and while people pay good money, they are essentially worthless." Much of the borrowed money was reportedly used to buy into the ongoing housing bubble in China and to purchase the Tri-Rind company, which owns swaths of land in Wuhan and Shenzen. Two Wall Street firms are believed to have already opened securities fraud investigations into the publicly traded gold giant. Some analysts have pointed to Kingold's controlling shareholder, Jia Zhihong – a former military top-brass who served in Wuhan and oversaw gold mines at the behest of the People's Liberation Army – as a possible reason why Kingold's action have not been probed in the past. "Commentaries on this breaking story argue that Mr. Jia's connections with China's powerful army meant he could do anything he wanted, no questions asked," noted the Australia-based Small Caps news site. "Questions are already being raised as to whether more of China's 'hard assets' of gold simply do not exist." Chinese President Xi Jinping attends the closing session of China's National People's Congress (NPC) in Beijing, Thursday, May 28, 2020. China's ceremonial legislature has endorsed a national security law for Hong Kong that has strained relations with the United States and Britain. (AP Photo/Mark Schiefelbein) As the news surfaced late Monday, shares in Kingold plunged 23.77 percent overnight, and the Shanghai Gold Exchange has reportedly canceled Kingold's membership. Nonetheless, Kingold has strongly denied that it is under investigation and dismissed reports of any wrongdoing. But analysts fear that the alleged Kingold scandal may only be the tip of the iceberg. "And over the past five to ten years we've seen a lot of these types of headlines," Wittmeyer said. "And we see on a weekly basis, customers trying to sell (fraudulent) gold." For example, purported gold bars were given as collateral to some 19 financial institutions in China's Shaanxi province in 2016. Only it was discovered after the fact that the bars were instead stuffed with tungsten. The reports come as tensions between the United States and China continue to simmer amid the fallout of the coronavirus pandemic, and when lawmakers are urging Wall Street to expel questionable companies from U.S. investments. Just three months ago, Chinese company Luckin Coffee came under fire after confessing to a $310 million accounting scam. In late May, the Senate unanimously passed the bipartisan Holding Foreign Companies Accountable Act in a bid to force foreign companies – with China likely at the forefront – to adhere to U.S. securities law, and compel some to be removed from American stock exchanges. The bill, which is yet to move through the House, would necessitate that "an issuer must make this certification if the Public Company Accounting Oversight Board is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board. Furthermore, if the board is unable to inspect the issuer's public accounting firm for three consecutive years, the issuer's securities are banned from trade on a national exchange or through other methods." More than 200 foreign firms – mostly Chinese with a combined market capitalization of almost $2 trillion – are said to not be meeting this standard. Thus, their stocks are traded, but U.S. investors have limited insight into what is going on internally with the companies. Subsequently, China and other international players would be obligated to accede to an audit that can be reviewed by the nonprofit Public Company Accounting Oversight Board, which oversees audits of all U.S. companies that endeavor to raise money in public markets. Poster Comment: Video at source. Brett Baier interviews Christopher Wray. Post Comment Private Reply Ignore Thread
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