Exposing Gold Fraud and Gold Scams

By Dean Arif, MY Bullion Trade:

All you need to know about gold deals, scams, fraud and the reality of gold trade and mining.

As one of the most prominent gold bullion dealers in Malaysia, MY Bullion Trade receives 10 or more offers a week. We have had every gold scam tried on us time and time again. After 7 years of tolerating these con men, compiling lists of modus operandi, emails and WhatsApp messages, we want to share with you some of the main gold scams so that you will not fall prey to these fraudsters especially if you are thinking of being the intermediary trying to profit from the commission or arbitrage.

Who wouldn’t want to buy gold at a huge discount to the prevailing price, pick up the metal and then dump it onto some bullion dealer and get paid the market price thus making an absolute killing, right?

The virtual market place on Internet, LinkedIn, Tradekey and other B2B online marketplaces is more than abundant of various gold trade deal offers. Gold dust, gold nuggets, gold dore bars, FCO, LOI, POP, POF, MT103, MTN, bank guarantees, SBLC, letters of credit, Aurum Utalium, Aurum Uranium, seller’s mandate, buyer’s mandate, reliable, reputable, gold mining communities, and so on, all that is the terminology belonging to the virtual fictitious market place as built by many of the fraudulent criminals.

1. The most common form is for sellers asking you to pay upfront costs for shipping the gold. Shipping is expensive at thousands of dollars. You will most likely receive your parcel but don’t expect to find much gold in it. Sand or gold-painted pebbles are the normal substitute.
2. Asking for a ticket to escort the gold direct to you or for an agent to do so. It doesn’t really matter what is being asked for – if you pay up front, don’t expect to hear from the scammer again. A few thousand dollars may not be much for you but from where they come from, a thousand dollars goes a long way.
3. Asking for a letter of introduction to business. This is often asked for if a seller wishes to escort the gold product and needs a letter for customs. Basically they are using your company to support their visa application. So unless you want to be dragged into a case for illegal immigration, DO NOT send the letter! Anyone with reasonable amount of gold to sell can get a visa or afford to ship it.
4. A lot of larger deals will ask you to send proofs, to prove you are able to complete on the deal. This is normally names of buyers, proof of funds, passport copies, etc. DO NOT send anything to anyone who you aren’t 100% sure of. These proofs are then used to run scams in your name, especially passports! With proof of funds and other legal documents, these can be used for blackmail, kidnap or scams, once someone knows you have a lot of money. BEWARE! Do not be a target!
5. More elaborate scams will have enough proof within them to get past the preliminary checks but will ask for a buyer to create a payment / financial instrument. Some form of bank MT103, SBLC, BG or escrowed funds. These funds are not to be paid out until completion of the deal, giving the buyer security. Unfortunately these can be monetised or used as proof of funds to then go out and purchase gold to sell to the buyer. This can even be done with an MT799 which is only a swift message of proof of funds between banks, but can be used to flip a deal once the scammer has proof of a willing buyer with funds.
6. The inheritance scam. Example: My father, my uncle died and left me 50 kilos and I just need so many dollars to release it. These are often backed up by equally corrupt lawyers or advocates in Africa. A variation on this theme is the girlfriend or boyfriend befriending you and then promising to come visit / marry and just needed a few thousand dollars to release the gold to sell to cover for the trip. Then a bit more will be asked, and a bit more, etc.
7. The buy large volume scam. Example: We have a buyer looking to buy 100 kg of gold bars per day or 1 tonne weekly on contractual basis. After establishing contact, the so called “buyer” would insist to test a 1 kg 999,9 gold bar before they could proceed with the contract. Isn’t it fishy that an established buyer would ask to test an already assayed, LBMA good delivery gold bar? The pressured and gullible intermediary would then use his or her own life savings to buy a kilobar and surrender it to the scammer to be “tested” but sadly, never to be heard from him again. All the scammer ever wanted was the 1 kilo of pure gold and not the hundreds of kilos stated in the bogus contract.

The main lessons are not to put any money up front and not to send documentation out to someone you don’t know. The ways to avoid this are to thoroughly do your research on the buyer, ignore anything on a social network site. Check the incorporation date of the company, size, website, directors, previous dealings in the industry, etc.

Shocking Facts on African Gold Deals

FACT NUMBER ONE: Most of the deals and offers of gold from Africa are scams, fake and fraudulent. What you see on pictures or videos is brass or lead painted in gold colour. Gold dust may be yellow, but not everything that shine is gold. Even if you see some true gold on pictures placed on a newspaper to indicate the current date, that is not the gold that you are going to get in your hands.

• Are you a “wannabe” middle person sitting outside of the location where you are offering the commodity, or are you a true intermediary having done your research and offering it only when you are 100% sure that the gold exist? Most of the times, intermediaries in gold business have never done any homework or background checks. The intermediary is usually found in a situation not even knowing the physical properties of gold, the capacities of those gold mines and the real volume traded in the market each year. The intermediary usually have never seen face to face, not even by Skype, the so called seller but is lured and naively tries to close the deal with the buyer who very often also turns out to be yet another intermediary in the chain of virtual traders! And gold is nowhere yet to be found.
• Only big companies could provide large volumes of gold. These companies have assets of many million dollars worth, and are usually well known public companies such as Randgold, Barrick, Ashanti and not so many others. A big company would not be that big if they would not know where to sell the gold.
• Small scale miners are small scale miners. Just that. They are not big companies. They are small communities. You may have 100 people working on the same mining site and getting not more than 3-5 kilograms per month. All those people need to live, need to eat, need to provide for their families. They are selling gold as fast as they get it out of the gold mine. In their whole life they usually never see a whole gold dore bar.
• If you would have 50 kilograms of gold, how much assets would you have in total? Maybe double that much. We speak here of millions of dollars. Do you really think that anyone who has assets of few millions dollars does not know where to sell the gold he has bought?
• Do you think that any real world trader is ever going to buy a quantity of gold worth millions without knowing where to sell the gold?
• Everywhere in Africa gold is being paid almost at spot prices. Don’t be lured that there is some cheap gold out there, waiting for you to make the deal of your life. Nothing to do on your side, just connect the seller and the buyer, and your commissions worth hundreds of thousands of dollars are paid in cash. It would be a dream.
• Don’t you think that the abundance of the supposed “gold offers from Africa” are not really proportionate to the reality of the mining activities in Africa?
• Did you know that export of gold dust is forbidden in many of the African mining countries? Gold dust must be melted, assayed and never sold in the original form. Further, there is no small scale mining company that will ever have kilograms and kilograms of gold dust, as whoever possess this much gold, they would be able to melt it.
• In the real gold market nobody is buying “gold dust”. There is no serious and licensed dealer in Africa anywhere that is going to buy “gold dust” ever because they are going to melt it down, assay themselves and pay in cash. Gold dust is not really a form how gold is sold.

FACT NUMBER TWO: A local gold miner has local gold buyers where he sells the gold and that was the main reason for the small scale miners to open up a gold mine in the first place. Do you really think that any small scale miner needs you outside, out there, in the foreign country to sell to you, when he can sell it locally?

If you are still in la-la-land being lured into thinking that there will be some nice gold deal to accomplish and all you need to do is to bring the buyer and seller together, or any other such combinations, you should first consider the fact that local buyers are everywhere.

Not only that gold is sold near the gold mines, it is sold and traded in any major city and town of any of the African countries that have developed mining activities.

As a matter of fact, most of the times, one will get in average more money for the gold than when sold as scrap in Western countries.

Gold is sold for cash and occasionally for bank transfers. Anywhere in Africa is the same. Cash is king. There is only one true procedure and that is: bring the gold, let me melt it, I am assaying it myself, and I am paying cash. Everything else like formalities and papers may be handled only when necessary.

There are no such things as FCO, LOI, POP, POF, bank guarantees, and all the nonsense that is being disseminated on Internet that is based on false information.

Gold is sold for cash. No questions asked.

If you believe that someone out there in Ghana or Mali or Tanzania have any problems selling gold for cash without questions asked, you are lured, naive and most probably you are inciting genuine and decent people to be involved in a criminal enterprise.

You may think that a local gold owner need an ID to sell gold? Yes, maybe by the law. But practical sales is as such: they bring the gold, the gold is melted, the gold is assayed on the simple water-based scale that measures its density, and gold is paid for cash. No questions asked.

There is some cheaper gold but one has to be established locally and work with the local company and provide time, effort and energy into making business by purchasing from small scale miners and trading with the dealers located in cities. It is very questionable if profits can easily be made by exporting such gold, due to the fact that exporting is costly, there are taxes and royalties to be paid, while quick business may be done with local guys purchasing it on the spot for spot prices.

FACT NUMBER THREE: Spot prices are available in each of the African countries. Yes, gold may be sold locally everywhere in Mali, Ghana, Sierra Leona, Burkina Faso, Tanzania, Congo and many other African countries. This alone shall appeal to your common sense, and if there is any gold trade deal out there that might be genuine, it shall be very well justified to go around this fact. Some refineries like AA Minerals in Ghana are going to pay 2% discount for any gold that is brought to them. Some dealers are paying spot prices and very often above the spot price. Large quantities are rare, and if you really wish to get the gold, instead of discount, dealer is going to pay better price just to get it. The large players in the market are converting cash for gold and they are paying for the speed. It is easier to win the Lottery than to close the deal on distance without being qualified for it.

Usually, gold brokers are located just nearby the jungle and bush in Tanzania, and they are paying like 5% discount. There are 15 people gathered in open, buying gold in this open hut. They are going to travel 4 hours to distant city and sell the gold for spot prices. Do you really think that anyone in that city would be willing to sell gold under the spot price, especially in quantities? Nobody is that crazy. People don’t give money for free. Would you give few thousand dollars to someone when you can get the spot price just there in your own city? Don’t be naive.

FACT NUMBER FOUR: There are actually gold deals that are genuine. But they are not going to appear on the Internet, emails or WhatsApp. You must go on the ground, explore, meet the people, make the connections, know your stuff, and you always need to give some benefits to miners and gold dealers in order to structure any deals.

Deals on a distance is mission impossible. WHOEVER REALLY HAS GOLD in the mining country, that person can easily sell the gold for cash at the spot and does not really need a foreign buyer. That is like if you have a car of $10,000 in US, and you know you can easily sell it for $8,000, but you place advertising on Internet to sell the same car in Malaysia for $6,000 — which would be complete nonsense, as everybody in your city would know that you may sell it for better price in your own country.

Our message is very simple. If a deal looks too good to believe, it probably is worse than you can imagine!

We have heard it all before with variation from different countries such as Brunei, Thailand, Philippines, Indonesia and even Japan! Not one of these deals ever materialises. Therefore, before forwarding such “good deals” and ANNOY us, please turn on your common sense!