The gold industry has been shaken after it was discovered that 83 tons of fake gold bars have been used as collateral for loans worth 20 billion yuan from 14 financial institutions to a major gold jewelry manufacturer in Wuhan, China. This amount of gold “would be equivalent to 22% of China’s annual gold production and 4.2% of the state gold reserve as of 2019.”
Using 83 Tons of Fake Gold to Get Loans
One of China’s largest gold jewelry manufacturers, Kingold Jewelry Inc., has been using fake gold to secure loans obtained from 14 Chinese financial institutions, Caixin reported Monday. The loans were for 20 billion yuan ($2.8 billion) obtained over the past five years. The Wuhan-based jewelry company was able to pass on the fake gold as pure gold, using it as collateral for loans and insurance policies to cover any losses. The publication detailed:
At least some of 83 tons of gold bars used as loan collateral turned out to be nothing but gilded copper. That has left lenders holding the bag for the remaining 16 billion yuan [$2.3 billion] of loans outstanding against the bogus bars.
Founded by Jia Zhihong in 2002, Kingold is the largest privately-owned gold processor in central China’s Hubei province. The Nasdaq-listed company (NASDAQ: KGJI) was previously a gold factory affiliated with the People’s Bank of China (PBOC) that was split off from the central bank during a restructuring, the publication conveyed. Kingold’s chairman and controlling shareholder, the 59-year-old Jia served in the military in Wuhan and Guangzhou. He previously managed gold mines owned by the People’s Liberation Army.fho
The fake gold was first discovered in February when Dongguan Trust Co. Ltd. tried to liquidate Kingold’s collateral to cover defaulted debts. However, the gold bars turned
