A large jewelry manufacturer and wholesaler in China has been discovered to have counterfeited 83 tons of gold bars in an effort to secure loans from financial institutions to fund their operations.
The company, Wuhan Kingold Jewelry, used the loans for cash holdings, to expand business operations and to increase gold reserves.
More than a dozen financial institutions loaned 20 billion yuan ($2.8 billion) over the past 5 years to Kingold with the fake gold as collateral. The gold has turned out in fact to be gold-plated copper bars.
This came to light in February when Kingold failed to repay investors on several loans. One of the institutions, Dongguan Trust, then tried to sell the bars it had in its possession. That’s when they discovered the bars were actually copper alloy.
After the news broke, other creditors began testing the collateral Kingold had put up for their loans as well. They were all discovered to be fake as well.
The 83 tons are roughly equivalent to 22% of China’s gold production and a little more than 4% of the country’s gold reserves.