Multiple Chinese Banks Lose ¥19 Billion in Fake Gold Scam

Fraudsters pledged gold collateral and obtained 19 billion yuan ($3 billion) in loans from 19 banks in Shaanxi and Henan provinces.

The fraudsters used fractional reserve lending to their advantage. The take 2.5 million yuan and buy 10,000 grams of gold (250 yuan/g). With 20 percent for collateral, they can borrow against the remaining 8,000 grams or 2 million yuan. Then do this again with another bank to obtain a loan for 1.6 million. In this way, a borrower can obtain 5 times leverage with gold.

Criminals quickly realized that you could obtain far greater leverage if you coated tungsten bars in gold:
"Finance" reported that, between 2011 and 2015, criminal gangs Zhangqing Min and their friends and family composition, organization and friends making doped tungsten fake gold, and with their friends and relatives and employees several times with adulterated gold collateral to obtain a loan at a bank or association; after the expiration of each loan, the gang also uses interest not principal, method others invested a few hundred dollars to sign false contracts Xudai extend the term of the loan actual employment.

During the loan, if the issues can not be achieved while gold prices fell pledge amount, they will cover their short positions in order to maintain the amount of adulterated gold. The same method is applied in other banking institutions. According to "Financial" it reported that multiple sources indicates that Zhangqing Min alleged fake gold mortgaged to another banking institution, tungsten content accounted for about 62%, accounting for about 38% of the gold. BRIC outer gold standard, with which the wrapping tungsten block, can fool the usual detection instruments, such as drilling and without melting the detection method is difficult to find.

As for income Piandai, while continuing to purchase materials used to make fake gold Piandai adulteration, the other is for the purchase of personal consumption houses, vehicles and squandered.

In early May 2016, letter of Tongguan sum of about $ 20 million because of the gold pledge loans overdue and contact the borrower Zhangqing Min collection. Dunning no avail, decided to dispose of the pledge letter of Tongguan gold, gold was found adulterated, ordered the matter several levels during treatment.

May 19 the same year, Tongguan County Public Security Bureau formally opened, with fake gold Piandai across Henan and Shaanxi provinces surfaced. February 2 this year, the CBRC notice that as of now, the public security authorities have arrested 35 people involved outside.
The Chinese government isn't stopping at punishing the criminals. They're also fining the banks and punishing bank employees for failing in their duties and responsibilities:
Shaanxi Banking Bureau of the 18 banking institutions involved in the case of total fine of 50 million yuan, of which, of association and Tongguan in Shaanxi Province Xianlian and 11 county-level rural credit cooperatives association fined 36 million yuan; to Post Reserve Bank of Weinan City, Shaanxi branch and its branches, Tongguan County branch fined 10 million yuan; Shaanxi branch of the Industrial and Commercial Bank branches and Weinan Tongguan County branch fined 4 million yuan.

Shall be punished for 95 persons responsible for these institutions, which canceled the SM qualification to life eight people a year, 87 people were given a warning; ordered the relevant agencies in accordance with the party and government and internal regulations, for 262 people given disciplinary responsibility economic sanctions and penalties; in addition, Shaanxi Banking Bureau of the poor performance of their duties internal control officers were accountability and discipline.
iFeng: 多家银行被骗贷190亿 没想到主要“工具”竟是它

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