By This news from last month I some how missed about a massive attempt at counterfeiting US Treasury Bonds that was uncovered in Italy:
Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.
Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.
What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.
The question now is who could or would counterfeit or smuggle these non-negotiable bonds. [Asia News]
The who is the big question and considering North Korea’s counterfeiting expertise I would think they would be a big suspect. The two people arrested claim to be Japanese nationals, but their identities have not been confirmed. Even if they are Japanese nationals it doesn’t mean that North Korea isn’t involved considering their strong ties with the Chosen Soren in Japan.
There has been some speculation that these bonds may have been part of a scam to sell US bonds to elderly Italians. It is also well known that scams are something the North Koreans also traffic in. Another theory is that these bonds are real and that a foreign country was trying to covertly dump $134.5 billion and that is why the US media is ignoring this story because it may cause a panic considering the amount of debt the US is piling up. Since the two men were taking the bonds to Switzerland it appears they were trying to get these bonds deposited in a Swiss bank, but how do you deposit $134.5 billion US dollars in a bank?
The Financial Times is reporting that this was part of a Italian mafia scam, but no one has been able to identify the two Japanese nationals yet. Here is what bothers me about this story, why if you are the mafia would you counterfeit such a large sum? It doesn’t make any sense. Yet another theory speculates that these two intended to get caught in order to shake confidence in the US dollar by exposing high quality counterfeit US Treasury Bonds.
William Pesek from Bloomberg sums this story up quite well:
It’s a plot better suited for a John Le Carre novel.Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.
Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?
The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale. (…….)
Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who? [Bloomberg]
Make sure to read the rest because it is a good article about this strange case.
To add further intrigue Asia News is reporting that the two Japanese nationals were released (Business Insider and the BBC as well) and that one of the men was Tuneo Yamauchi, brother-in-la of Toshiro Muto, who was until recently Deputy Governor of the Bank of Japan. If the notes were fakes created by the Mafia than why did the Italian authorities let these two go? Even without North Korean involvement this is just a strange case all around.
Anyway here is a Japanese news report on this story:
Here is some further reading from Bloomberg, Reuters, and Market Ticker.
It is the sad reality. No mistake...
12:12 am on July 14th, 2009 1
I would say they were real Japanese, and the Japanese are trying to secretly dump the US dollar reserves. You tell me why this story hasn't been revealed fully unless this could blow the lid off the US and the global economy? Why all the secrecy?
12:34 am on July 14th, 2009 2
Dump the reserves and go cross country for it? Why? Wouldn't it be easier to just burn it?
2:54 am on July 14th, 2009 3
If a government was trying to unload the bonds or stash them away overseas, wouldn't it be easier and less risky to use a diplomatic pouch and then have a private citizen deposit them?
6:02 am on July 14th, 2009 4
Fascinating stuff. It's true the dollar is going to suffer extreme devaluation over the next few years but I wouldn't think the Japanese would resort to this cheesy method of dumping US treasuries.
134 BILLION DOLLARS though? Only people who know they could get away with it would try such a thing. I think this story should be followed very closely to see what's really going on.
8:22 am on July 14th, 2009 5
Yeah, last month I was surprised not to have seen this here. People were making all sorts of crazy predictions about the immediate aftermath, which of course never came into fruition.
4:17 pm on July 14th, 2009 6
This is so last month.
The best explanation to come out of this was that there is a weird Philippine religious cult that has been saying for years it has this huge stash of US bearer bonds that they recovered from the wreck of a DC-10 that crashed in the Philippines in the 1930s as the CIA was flying the bonds to Nationalist China to prop them up against the Japanese. Yes, you read that right – a US government body that was not going to exist for another decade was flying US bearer bonds worth the entire world gold reserves to China via the Philippines in a plane that would not even appear on a drawing board until 30 years after one crashed.
This cult has also produced a video of stacks of these "bonds" that look exactly like the ones that showed up in the Swiss border. And "high quality"? Try "play money printed in denominations that have never, ever existed". You can't even call what these guys were carrying "counterfeit" as you can't counterfeit something that never existed. You might as well call monopoly money "counterfeit". They could never have been redeemed for cash, as anyone with that amount of cash would also check the serials, and very quickly learn they were looking at play money. So of course this hasn't shaken confidence in the dollar, no more than it did a few years ago when other con men were caught in California with identical fake bonds.
So why make them if you can't cash them? Because you don't need to cash them to turn them into money. If you're running a scam, what better way to convince your target that they can trust you with there money than to show them that you don't need it, because you have more money than they do, so they are guaranteed to get their money back no matter what? Fancy-looking pieces of paper showing that you hold millions and millions of USD will do that. Heck, people believe Nigerians and they don't even show fake money, right?
10:48 pm on July 14th, 2009 7
Like I mentioned in the posting this may be a scam but it doesn't explain why the police didn't arrest the two Japanese guys who were smuggling the counterfeit bonds?
11:17 am on July 15th, 2009 8
Arrest them for what? Walking around with play money is not a crime. Now, if they were trying to cash the bonds in knowing they were fake, then they could be arrested for passing a false note. If they used the bonds as "collateral" to bilk someone out of their money, then they can be arrested for fraud. Possibly they could have been arrested for trying to cross the border with the bonds but not declaring them if the bonds were real, but since they aren't then no crime has been committed – probably to the chagrin of Italy as if they had been real Italy would have been entitled to keep half of the bonds under the applicable laws (which might be why Italy was so quick to initally say the bonds were "real"). Even if the two guys carrying them presented the bonds as real, all they have to do when it turns out they are fake is say "What? We've been scammed! We're victims!" You can't arrest people for being stupid.
All that leaves would be possible passport fraud, if under investigation it turned out the two were not actually Japanese and were using false passports. But that is the only charge I can see that could be applicable here.