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Scam Alert: Counterfeit Gold Bars


Eleven fakes are found in New York and reported to the FBI.

MINYANVILLE ORIGINAL For many Main Street investors, only the physical asset will do. Unfortunately, counterfeiters have found a way to exploit that desire. At least 11 fake Swiss-made gold bars were found after exchanging hands in New York's Diamond District.

The bogus gold was busted when the purchaser of four 10-ounce gold bars costing nearly $18,000 each drilled into one and discovered it was filled with tungsten, which costs just $1 an ounce. The purchaser, Ibrahim Fadl of Express Metal Refining, has been in the business 40 years, and had heard that fakes had been found in England, so he drilled into one of the bars just to check. The bars had already passed x-ray and weight tests.

In what appears to be a devious and sophisticated operation, the bars are created from real gold bars and are realistic enough that they have duped reputable dealers including Express and possibly the well-known gold salesman who sold him the merchandise.

In the Express case, the bars were made by the Swiss manufacturer, Manfra, Tordella & Brooks. The bars were hollowed out, filled with tungsten (which weighs about the same as gold), and sealed. The real serial numbers and papers of the original bar accompanied it. "The Swiss markings were perfect," said Fadl.

MTB's CEO, Raymond Nassim, said he suspected the counterfeiter must be a professionally trained jeweller. "The forger had to slice the original bar along the side, hollow out the gold, and insert the tungsten ingot, and then reseal and polish the bar," he told the New York Post. MTB reported the situation to the Secret Service, which deals with counterfeits.

After the first incident, a second Diamond District street merchant reported buying six fake gold bars, according to the Post.

In March, a 1-kilo fake gold bar was reported in the UK after being purchased by a scrap dealer. It, too, was tungsten-filled, although the manufacturer was a different Swiss company: Metalor Technologies -- an international gold refiner and bar manufacturer.

If an investor can live without the physical asset, safer bets might be funds, including PowerShares DB Gold Fund (NYSEARCA:DGL), Market Vectors TR Gold Miners (NYSEARCA:GDX), and RBS Gold Trendpilot ETN (NYSEARCA:TBAR).

No positions in stocks mentioned.
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