Gold speculation scams on the rise

Updated: 2013-03-04 07:46

By Wang Zhenghua in Shanghai (China Daily)

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Cheating investors under the guise of gold speculation on international markets is an emerging form of fraud, a local court said.

Since the end of 2012, the court of Shanghai's Jing'an district has tried several criminals who got investors to speculate in valuable metals in false accounts or take part in illegal overseas gold or foreign exchange trading. The investors ended up being cheated.

Wealth management professionals said victims were attracted to illegitimate service providers by the principal they required - as little as 5 percent of what legitimate wealth management institutions demand.

The criminals exploited the investors' ignorance of gold investment to make off with the principal.

"Only nine major banks in China are allowed to provide services in valuable metals investment, and investors should select these legal channels, where the safety of their cash deposit can be ensured," said Yang Fei, an analyst at Seewonder Financial in Shanghai, which provides financial derivatives services.

Because of the long bear run on China's stock market, many investors turned to the gold market, where criminals can prey on the unwary.

One criminal tried in the Jing'an court is Wang Ximing, 32, a veteran in financial investments in Shanghai.

After gaining a fortune during the investment frenzy of 2006 - through which the stock market gained 130 percent by the middle of 2007 - Wang quit his job.

But he soon squandered the money, and in October 2009, he found an ID card and used that man's identity to rent an office in a mansion in Shanghai and promote gold trade on international markets. Wang registered his company's name via the Internet in Hong Kong.

To avoid police inspection, he bought an idle deposit bank card online to receive money from the victims of his scheme. During this period, Wang married a woman named Jiang, and the two operated the illegal business together.

Through deceit, they coaxed a middle-aged woman, identified as Xu, into transferring 200,000 yuan ($32,000) to the bank account Wang controlled.

When Xu discovered the fraud, she went to the police. They detained Wang in May and set bail for his wife, who was nursing.

Police said the couple never opened an account for Xu in overseas markets, and all the transaction records were falsified. The Jing'an court sentenced Wang to five years in prison and gave his wife probation.

A woman who was a victim of Wang's fraud later worked with him, the court said. The 24-year-old woman, identified as Yang, helped Wang coax people, many of whom paid the woman to invest in the stock markets, into the gold speculation scheme.

Modeling her scheme on Wang's approach, Yang installed fictitious software for her clients and shared the profits from the scam with Wang.

In July, Yang was caught at her home in Shanghai. She pleaded guilty to her crimes and returned all the money with the help of her family. She was sentenced to two years in prison with a two-year reprieve.

A third criminal, the court said, is a graduate of the Beijing-based China Management Software Institute identified as Huang. He had planned to pursue his career in Shanghai but ended up in prison for three and a half years with a fine of 103,000 yuan for his illegal activities.

Without approval from Shenzhen financial regulators, Huang made an agreement with a financial firm in Shenzhen in early 2010. Under the name of a company registered in Hong Kong, Huang illegally solicited gold investors for the Shenzhen company and earned commissions.

By May 2012, he had about a dozen clients from Shanghai and Chongqing and had collected more than 1 million yuan in cash deposits.

(China Daily 03/04/2013 page4)