Another gold scandal! How much longer will customers and intermediaries tolerate fraud in precious metals?

In February 2024, the once-renowned Swiss Gold Treuhand AG (SGT) notified a Swiss court that it had fallen victim to criminal acts by a former employee and had discovered forged raw gold receipts. As it turned out, investors are missing raw gold worth 84 million francs, contrasted by SGT assets of only 5.7 million francs. Also involved is the cooperating company SGB Vault AG, where gold bars with invalid hallmarks were found. According to Stiftung Warentest, it is unlikely that customers will ever see any of the gold or their invested assets again.

A fraud case in the precious metal trade had already occurred in Berlin the previous year. A 63-year-old man and his 34-year-old wife must answer in court for 287 cases of fraud. The man had offered coins and bars in his online shop and eventually lost track due to a lack of accounting. Customers were required to pay immediately and provide a flat-rate shipping fee, but often waited in vain for delivery. In the end, 280 victims who had paid up to 77,000 euros were defrauded of their money. The total damage amounted to over 2 million euros.

Both gold scandals are strongly reminiscent of the 2019 fraud case at PIM Gold. The Hessian company had sold gold that did not exist at all. Approximately 10,000 customers were affected, some of whom lost their entire retirement savings. Based on the gold price at the time, the damage amounted to 140 million euros. The starting point in both cases is a form of trading called “gold lending.” Customers leave their purchased gold with the dealer and receive interest in return, but they are not owners of their goods; they are creditors. However, if something goes wrong with the dealer, the customers bear the risk. This is extremely dangerous!

While the head of PIM Gold is now in prison, his employees remain at large and have even founded a new company: Bonus.Gold. It is hardly surprising that this one has also made it into the scandal reports. By decree of November 25, 2021, the Cologne District Court opened preliminary insolvency proceedings over the assets of Bonus.Gold GmbH. Once again, investors had purchased gold, this time for 45 million euros, and handed it over to the company immediately. And once again, it was gone afterwards. Part of the gold originated from dubious sources in clan circles and was located in Turkey at the time of the insolvency proceedings. This makes it difficult to access from Germany.

And the scheme is by no means new. Thousands of investors had invested 50 million euros in gold with the Berlin BWF Foundation. The case went to trial in 2017 because the purchased gold was either filler material only thinly coated with gold or simply non-existent. The small amount of gold found in the BWF vaults was worth just 11 million euros.

This list could be continued much further. The commonality of these fraud cases is that customers gave up possession of their gold without retaining their ownership rights to it. Certainly, gold is in higher demand as an investment than ever before. However, especially with larger quantities, it is important to leave storage to professionals who utilize Finomet’s digital control of fund usage. Because only then can gold be what it is intended to be in a portfolio: a safe haven in stormy times.
Financial intermediaries in particular are now called upon. They must insist on unforgeable and unmanipulable proof of storage from their product providers, or simply change the product provider!