Fraudulent 10 oz Gold Bars
Show Up in Manhattan’s Diamond District
EVG Research Team here, and this story has Manhattan’s famed “Diamond District” on edge.
It’s a story about devious schemers trying to take advantage of rising gold prices.
Abe Shehadeh was running late to the meet-up. He meant to be on time, but running your own precious metals store during the biggest gold boom since 1980 keeps you busy.
Especially if your storefront is on 47th street in Manhattan, one of the largest jewelry hubs in the world and nicknamed the “Diamond District.” It’s reported $400 million dollars changes hands here every day.
Abe almost left on time. But on the way out the door, he stopped to assist an employee having trouble convincing a customer that American Gold Eagle coins really had climbed $30 overnight.
The customer, dressed in a pricey Valentino suit, wouldn’t believe the computer screen, so Abe grabbed his half-read copy of the Wall Street Journal. Flipping through the pages quickly, he knew right where to turn.
There it was, printed in ink: $1775 for one troy ounce of gold. Abe always tacked on 3% as a service charge, pushing the price of a Gold Eagle coin over $1,800 – a level reached few times in history.
“Valentino” finally gave in: “Fine. Gimme 10 Gold Eagles now before you jump the price on me again.”
Abe realized he was buying 10 ounces, and asked “Would you rather buy one 10 oz bar than 10 coins?”
“No, too easy to fake the bars. I hear fakes are making the rounds.”
Abe nodded and thanked the suit for coming in. It was past time to leave for his meeting, and …
…He Wasn’t Going to Argue that
Fake Gold Bars Are Almost Unheard of
Abe didn’t fear fakes. He used a number of safeguards: weighing to make sure the ounces matched, X-raying to ensure purity all the way through, and only trading with reputable dealers.
Plus he bought bars from a swiss mint that engraved serial numbers into the metal.
The current dealer, patiently waiting for Abe at their meetup spot, was trusted. He went by “Teddy,” because saying his Russian name correctly was as rare as bowling a perfect game.
This wasn’t the first time Abe had done business with Teddy. And at their last meeting, Abe felt Teddy might be willing to bargain.
So as he walked briskly, he rehearsed his negotiation tactics. Gold had recently jumped $70 in price, but he knew for a fact Teddy purchased the gold before the rise… maybe long before, when gold was $100-$200 less.
Truthfully, a distributor had every right to sell gold based on today’s spot price. But it pays to negotiate, and Abe hoped to save at least $50 an ounce. Because if you’re buying ten 10oz bars, do the math: that’s 100 ounces and $5,000 savings.
Abe walked into the meeting spot, Behr’s Jewelers. A jewelry store comes with more security than a Starbucks meetup might. Plus, Mr. Behr was a mutual friend, and Teddy was meeting him to pitch a new collection of diamonds.
Mr. Behr was huddled over Teddy’s glowing jewelry when Abe approached. “Abe! You made it in one piece! I noticed the time and was worried.”
“Yaa, my apologies. My employee’s are driving me mad, I had to fix an accounting error. See, after he…”
Abe was rambling as he invented a lie. It’d be harder to negotiate a lower price if Teddy knew business was booming and he could barely escape the rush of customers.
“Yes, yes, fine, no problem. I’ll have them bring in the bullion,” and Teddy nodded to his oversized, intimidating associates. When you carry that much rock, it’s good to hire security guys who could just as easily be headlining for World Wrestling Entertainment.
Ten, 10 ounce gold bars from the Swiss mint were laid in front of Abe. “They’re beauties,” said Teddy.
And Abe Hoped to Get Them For a Steal
Truth is, though, Abe was an awful negotiator. He forgot his planned script and just let out his starting bid, “How about $1,500 an ounce, fifteen grand a bar.”
Silence followed, as Teddy looked Abe in the eye.
He tried to recover with, “You bought it for less than that, right?”
Teddy stared even harder into Abe’s eyes.
“Sure, sure. No problem, $1,500 an ounce is a deal,” he said.
Abe was as shocked as everyone else in the room; he noticed Mr. Behr give Teddy a skeptical glance. That was just his opening bid; he was waiting for the counter offer when Teddy accepted.
No reason to argue, though. The deal was made.
Teddy continued, “After Mr. Behr and I are finished, I’ll stop by and deliver them to your store with my associates. We’ll take care of money there.”
That was easy, Abe thought, and he made the walk back.
An hour or so later, Teddy stopped by with his muscle-men and the trade was completed.
Before Abe went home that night though, the “quick and easy” deal started to bother him.
Why had Teddy accepted such a low price? And with no counter offer?
The words from “Valentino,” the problem-customer earlier that day, haunted Abe’s thoughts, “…too easy to fake the bars. I hear fakes are making the rounds.”
It bothered Abe enough that he asked his security team to stay after closing. He wanted to look closer at the ten 10 ounce bars he’d just purchased.
Abe compared their size to other 10 ounce bars, and they were exact.
Abe weighed the gold, and they were close. Very close, but not exact. This furthered his worries, but he wasn’t yet convinced.
If these were fakes, they were the best fakes Abe had ever seen. They looked flawless, like they just came out of the mint. And the serial numbers added credibility.
The next test was to X-Ray each gold bar… and they passed. They seemed to be filled with solid gold.
Still, the day’s events ate away at Abe. He HAD to know for sure.
Abe Decided to Drill Through the Gold…
…and see what was inside.
When he did, he about fainted. His heart dropped to his knees.
Tungsten. These bars were filled with tungsten, not gold.
Here Are Pictures of the Actual
Fraudulent Gold Bars Discovered in Manhattan
This story of Abe and Teddy was dramatized fiction using fake names.
But it was based on true events.
Last month Ibrahim Fadl, owner of Express Metal Refining on 47th street in Manhattan, purchased 4 gold bars from a trusted Russian salesmen that turned out to be fake.
The day after the fake gold bar was reported, 10 more fake bars were discovered as more buyers decided to check their validity.
No one is blaming the gold salesmen at this point. He could have been tricked as well, though Ibrahim was suspicious that he got such a great deal.
In the aftermath of the scandal, Mr. Fadl said, “It has the entire street on edge. I and the others on the street work off of trust; now that trust is strained.”
So the question for you, is, who do you trust and…
Do You Need to Worry About Fake Gold?
First of all, it’s not easy for fake gold bars to enter the market. Most transactions of this size leave a paper trail, making it easier to spot the con artists if fake bars show up.
Only a handful of fake bars have been discovered so far. It has some believing that maybe a government or terrorist organization is just trying to unnerve gold bugs to keep the prices from rising. Although there’s nothing to verify this opinion.
And If You Are Worried About Fake Gold
…you can always stick to gold or silver coins.
They’re not foolproof, but the costs of counterfeiting are so high that one ounce coins probably wouldn’t be worth messing with. It’s the same reason why you don’t see counterfeit $5 or $1 bills – they’re not worth the effort.
You can also keep tabs on the gold market for scams like these, and find out where we buy our gold and silver, when you become an EVG member.
If you’d like to join EVG and take advantage of surging metal prices – without getting taken for a ride by schemers – go here now:
Your Partner in Prosperity
The EVG Research Team