KGJI Short Report – The tale of fake Chinese Gold

image_pdfimage_print LLC - Second Sight Markets Analysis 6/30/2020 -- Many traders are tuned in to the fact that China Fraud Inc. is a toxic form of capitalism where losses doesn't exist and markets go straight up.  It's like the 1880s before any market regulations existed and it was possible to sell snake oil as a product in stores.  Today's tale of fake gold is both shocking and not surprising.  It's not surprising because China has a history of doing this - it's almost baked into their culture.  It's shocking because the scale of the forgery is $20 Billion.  It's right out of a Hollywood movie.  Bottom line, $KGJI is going to zero.

Here is our short research on KGJI

Summary of the facts:

  • Tungsten was wrapped with a copper alloy and Kingold pretended it was gold.
  • This Fake Gold was placed in vaults.
  • The fake gold was insured.
  •  The fake gold was borrowed against.

A.. This Chinese Gold company actually was using a copper alloy to create the illusion of gold bars of value.

B.The co is based in WUHAN but is a DE CORP. Kingold creditors also tested pledged gold bars and found they were fake.

  1. There’s high probability that Hengfeng Bank was an active participant in the Kingold  fraud.
  2. EPIC STORY  OF THIS FRAUD - This is a great read.

  1.   Hengfeng Bank just received a $14B infusion.

Its past Chairman received a death sentence and to avoid the appearance of failing banks, the government put together a consortium to bail out Hengfeng Bank in Shandong Province.

The Hengfeng bailout is particularly interesting because this bailout just occured:

  1. i) Hengfeng Bank has failed to file its financial statements since 2016; and,
  2. ii) The bank's past two chairmen were each separately investigated and charged with corruption... the first in 2014, the second in 2017.

iii) The bank’s corruption and Kingold’ corruption are interconnected .(below)

  1. iv) Given the fraud, this active participant may be a source real deep pocket.

v} Several industry sources claimed that the institutions were willing to offer loans to Kingold because

Jia (Founder) promised to help them dispose of bad loans.

F, Hengfeng Bank Bank transactions

Hengfeng Bank bank in 2017 provided an 8 billion yuan loan to Kingold, which in return agreed to help the bank write off 500 million yuan of bad loans, bank sources said. Kingold repaid half of the debts in 2018.But the loan issuance involved many irregularities as access to the pledged gold and testing procedures was controlled by Kingold, one Hengfeng employee said. The loan was pushed forward by Song Hao, former head of Hengfeng's Yantai branch

G INVESTIGATION OF Chairman of Hengfeng Bank starts

On 11-28-17, the date the Chairman of this bank was placed under investigation, the smart money begins to get out of KGJI  Interesting correlation. The market appears to know that that exposing Hengfeng Bank, would expose KINGOLD gold to copper corruption. The Shares in Kingold literally reverse from above $10/per share and the smart money got out.

H, Investigation of Bank  heats up

(3/2018)Song was placed under graft investigation in March 2018 in connection with the bank's disgraced former Chairman Cai Guohua, whose downfall led to a major revamp in the bank's management.  (In March 18 material correction in KGJI shares)

  1. 2019 Hengfeng's new management sued Kingold over the fake gold.

In 2019, Hengfeng's new management sued Kingold for the unpaid loans and moved to dispose the collateral.

But a test of the gold bars found they are "all copper," the bank source said.  (Shares had multiple material corrections as this fake gold issue  played out.)

  1.   Status today - shares off 20%.

“It is still unclear whether the collateral was faked in the first place or replaced afterward.”

Sources from Minsheng Trust and Dongguan Trust confirmed that the collateral was examined by third-party testing institutions and strictly monitored by representatives from Kingold, lenders and insurers during the process of delivery.

"I still can't understand which part went wrong," a “Minsheng Trust source said. Bank records showed that the vault where the collateral was stored was never opened, the source said.

Conclusion - Short KGJI

This stock is probably going to be delisted at best.  Short it if you can, it's going to zero.

For a great read on this see Zero Hedge's break on the story:

In retrospect, it probably meant "copper" future, because as a remarkable expose by Caixin has found, more than a dozen Chinese financial institutions, mainly trust companies (i.e., shadow banks) loaned 20 billion yuan ($2.8 billion) over the past five years to Wuhan Kingold Jewelry with pure gold as collateral and insurance policies to cover any losses. There was just one problem: the "gold" turned out to be gold-plated copper.

For more detailed research, signup to Second Sight by Crediblock

For more info on Second Sight Market Analysis click here.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.