Over recent months, market participants have witnessed many mind-boggling events. It would seem that nothing could surprise them anymore. Yet, as it turns out this year has much more jaw-dropping events in store. In China in notoriously famous Wuhan, the biggest gold fraud has recently taken place: 83 tons of gold bars used as loan collateral turned out to be nothing but copper.

Wuhan Kingold Jewelry Inc., which describes itself on its website as "A company with a golden future", has used fake gold bars with a total weight of 83 tons as collateral to obtain loan worth 20 billion yuan ($2.8 billion). At first, everything went smoothly. The deal was concluded and the creditors remained satisfied with the collateral. The scam came to light when some creditors tried to liquidate Kingold collateral to cover debts as the borrower did not make payments. However, creditors were outraged as they found out that the gleaming gold bars were actually gilded copper alloy. When this news reached the market, it sent shock waves among gold holders. Investors are now asking quite a reasonable question about the quality of China's Gold Reserve. 83 tons of gold total 22% of the country's annual gold production and 4.2 % of the state's gold reserve, which means that more than 4% of China's official gold reserves may be fake. China is already considered the world's biggest counterfeiter of various things. Nevertheless, when it comes to gold resort, it gives food for thought about the scale of fraud in China. Thanks to connections with the Chinese army, the founder of Kingold could do anything, including forging 83 tons of gold bars to obtain billions of dollars in loans.

Notably, the company’s CEO denied all the accusations. "How could it be fake if insurance companies agreed to cover it?" he said. It is worth noting that this is not the first gold-loan fraud case in China. However, previous investigations into loan fraud have revealed that borrowers were acting in collusion with financial institutions.