By David Levenstein
In 2010 several tons of gold imported into the UAE by traders and investors turned out to be fake resulting in loss of millions of dirhams.
According to Managing Director of Emirates Gold, Mohamad Shakarchi, “a lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated. We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them.”
At the time, Mohammed said that at least five tons of fake yellow metal was lying with Dubai Customs, and merchants estimated that the minimum loss of fake gold imported by local traders was nothing less than $200 million. Gold was trading at around $1200 an ounce.
Most of these gold scams are coming from Africa. The gold scammers claim to be established gold merchants or mining companies. They claim to be in possession of large quantities of gold dust or gold bars, which they offer to sell at below market prices.
These so called dealers often claim to be registered with government agencies such as the Precious Mineral Marketing Company (PMMC) in Ghana, in order to gain the trust of potential victims.
In the event that the buyer is not prepared to travel to see the “gold,” the would-be buyer is made to send money for travel of the seller, for insurance, for shipping and for refinery assay. The buyers are always shown samples, which are usually real gold. But, when the actual consignment is sent, it will be only mud or sand.
And, of course, the seller can walk away at any point with virtually no risk of being caught as all contacts are via anonymous free webmail accounts accessed from Internet cafes and via prepaid mobile phones.
A week does not go by when we receive offers from some gold dealer in some African country. Typically, these offers to sell gold dust or gold bars come from some dealer located in Kenya, Ghana, Sierra Leone, Republic of Mali, Senegal and Cote d’Ivoire.
An example of such an offer usually begins something like this:
I am Kwassi Mensah from the family of his royal highness NANA APAI MENSAH of the Ashanti Kingdom in Ghana.
As part of our royalty, we, the royal family is entitled to some percentage of the total gold mined in the Ashanti kingdom, in view of this, we have in stock 280kg of a Alluvial Gold Dust 22 Karats, we are looking for a serious buyer.
Another example may look like this.
We are a group of miners located in Africa presently in Tarkwa Ghana. We are the best in local mining in the history of mining in Ghana, we can supply up to 100kg per month, and we do CIF with no upfront payments needed by our LMO which is the local mining organisation, all transactions to be closed via our UK Partners “Alliance Brokers UK or GMM “Ghana Ministry of Mines.
Our AU is noted for its prolific purity of 96.7%- 98.9% purity and can be refined up to 23 carat plus, 100% POP of merchandise will be provided to seller while buyer provides POF and transaction to be closed via Alliance Brokers.
We are ready to work with any mandate/broker with a qualified certified buyer with legal rights to buy AU gold from Ghana/Africa.
No matter the format, as soon as you receive one of these letters you have to believe that there is no gold on offer and you are being set up by some unscrupulous group of thieves who will have no hesitation in taking you and your money. It is simply another version of the old and ubiquitous Nigerian 419 scam.
The sellers will try and lure you to coming to see them just as long as you bring some money with you. Then, in an elaborate web of false documentation and well-greased government individuals you will be quickly separated from your money and lucky to be allowed to leave the country.
I remember an incident that happened to me several years ago, while driving from South Africa to Harare the capital of Zimbabwe. On my way to Harare I stopped to fill my car with petrol (gasoline). Suddenly, from nowhere, this polite black man approached me and asked if I could give him a ride to a mine which he claimed was roughly 40 kilometres from where we were. At the time I was a bit sceptical, but nevertheless, I agreed. As I climbed into the drivers’ seat, and just as my passenger got into the car, two other black men unexpectedly jumped into the rear seat. When my passenger sensed my reluctance to start my car, he assured me that the two other black men were friends of his who also worked at the same mine.
To cut a long story short, I decided, to proceed.
When we were about ten kilometres from the mine, my passenger pulled out a small bottle filled with gold granules, and offered them to me at, a ridiculously low price. When I told him I had no interest in gold, he pulled out a small gold bar and told me that I could buy it from him for a fraction of the market price….. sound familiar? The closer we got to the entrance of the mine, the more persistent he became. Finally, I relented, only to get them off my back and knowing full well that I was about to be scammed. So, I claimed that I could only offer them a few Rand being the balance of the money that I had left. I pulled out my wallet while driving and handed it to him saying that he could take whatever was in there. When I traveled in Africa, I was always well prepared for such eventuality, and in this case the bulk of my money was safely hidden elsewhere). My newly acquainted gold bullion dealer did not protest, and took the money. He also handed me the “gold” bar. And, at the entrance to the mine, they all got out the car, and wished me a safe journey. I knew that I had not bought 300 grams of gold for a few hundred rand but was relieved that I was on my own again. When I got to Harare and related the event to a business associate of mine he had the bar assayed, and as expected there was not a bit of gold in the bar. I had bought about 300 grams of gold painted lead. But, since I had only paid about R200 for it, I didn’t feel so bad and considered it to be a curio from Zimbabwe.
When I entered this business in 1979, there was a particular gold scam that is still going strong to this day. And, it is constant reminder to me how naive, or stupid or greedy people can be. The pattern is exactly the same each time. Some nobody from nowhere contacts me because they have an order to buy a huge quantity of gold. It usually runs into several hundred kilograms per month, and in most cases it emanates from some buyer in the Middle East or more recently a buyer in Russia. The person contacting me always swears that it is a legitimate deal and that they “know” the buyer. All they want is a small percentage of the deal. Now if anyone truly believes that a legitimate buyer is going to entrust some nobody to buy several hundred million dollars’ worth of gold on their behalf, then you are really an idiot. In the last 33 years, I have never ever seen one of these deals materialize and we simply don’t waste our time with such inquiries. Usually, the seller will demand some form of good faith deposit from you before the deal is concluded and if you are dumb enough to pay, this will be the last you will see of your money.
My message is very simple. If a deal looks too good to believe, it probably is worse than you can imagine, and when adding precious metals to your investment portfolio stick with bullion bars and coins.