The Latest Gold Fraud Bombshell: Canada's Only Bullion Bank Gold Vault Is Practically Empty

Tyler Durden's picture

Continuing on the trail of exposing what is rapidly becoming one of the largest frauds in commodity markets history is the most recent interview by Eric King with GATA's Adrian Douglas, Harvey Orgen (who recently testified before the CFTC hearing) and his son, Lenny, in which the two discuss their visit to the only bullion bank vault in Canada, that of ScotiaMocatta, located at 40 King Street West in Toronto, and find the vault is practically empty. This is a relevant segue to a class action lawsuit filed against Morgan Stanley, which was settled out of court, in which it was alleged that Morgan Stanley told clients it was selling
them precious metals that they would own in full and that the company
would store, yet even despite charging storage fees was not in actual possession of the bullion. It appears that this kind of lack of physical holdings by all who claim to have gold in storage, is pervasive as the actual gold globally is held primarily in paper or electronic form. Lenny Organ who was the person to enter the vault of ScotiaMocatta, says "What shocked me was how little gold and silver they actually had." Lenny describes exactly how much (or little as the case may be) silver was available - roughly 60,000 ounces. As for gold - 210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form, which Adrian Douglas calculates as being $100 million worth, which is just one tenth of what the Royal Mint of Canada sold in 2008, or over $1 billion worth of gold. As Orgen concludes: "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."

Also note the interesting detour into what Stephan Spicer of the Central Fund Of Canada, said regarding his friend at a major bank, who wanted access to his 15,000 oz of silver, and had to wait 6-8 weeks for its to be flown in from Hong Kong.

It is funny that central bankers thought they could take the ponzi mentality of infinite dilution of all assets coupled with infinite debt issuance, as they have done to fiat money, and apply it to gold, in essence piling leverage upon leverage. They underestimated gold holders' willingness to be diluted into perpetuity - when the realization that gold owned is just 1% of what is physically deliverable, you will see the biggest bank run in history.

Link to full Eric King interview.

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truont's picture

Who trusts these banks to hold their gold?  Really?  After all they have done, after all the CDO fraud, HFT front-running, helping Greece circumvent EU rules, and Repo 105 scams, who trusts these banks?

 

MarketTruth's picture

If you don't physically hold it, you DO NOT own it. It truly is as simple as that.

Postal's picture

Even if you physically hold it, you don't (or won't) own it if the gov't finds out.

DoChenRollingBearing's picture

Depends on how well you hide it.

Depends on what jurisdictions you have your physical.

Be creative!

...

If enough gold holders also happen to be gun owners, then a confiscation is unlikely.

Stuart's picture

AND it depends upon how many guns they face from the citizenry!  Why would anyone expect any different response to pure theft.

Sam Malone's picture

But how many GLD owners are going to push for delivery? Exactly none, which is why this will continue unabated.

dumpster's picture

thats why they bought gld to lazy to read the perspectious ,  so they are clueless about physical gold ,

Bananamerican's picture

someone enlighten me, but does such an infinitesimal physical backing on gold claims make it incredibly precious or basically worthless?

 

(disclosure: i own physical)

tmosley's picture

Both.  Physical gold will increase dramatically, while the paper value will approach zero.

jeff montanye's picture

this may not be true, at least for some time (long enough for profitable trades).  if gld settles in cash, like the notorious "failure to deliver" trades with the 25% premium to spot price we've heard so much about, it would pay in dollars based on the spot price, less fees.  the crucial ingredient, imo, is that someone, probably a significant economic amount of someones, insists on actual physical delivery to break the veil of illusion that maintains the power of the naked shorts.  if the dilution of the actual, tradable stock of physical bullion by these "paper gold" tracking derivatives is made plain, the resulting short squeeze, it would seem, would benefit both the holders of actual bullion and of paper gold, at least for a while.

regarding gunfire and gold confiscation:  no one shot or got shot in the thirties when required to turn in gold before it was revalued.  some tried the courthouse and lost.  few were prosecuted (probably some gold was smuggled abroad and sold).  there are other ways to own gold mines than to own all of one and not work it, aren't there?  own stock in one that is being worked?  these did very well in the earlier iteration and no stock owners experienced confiscation. 

Monedas's picture

Won't that be delicious ! Almost as much fun as watching government snipers shoot their terrorist loving citizenry ! I'm having too much fun and wetting my pants because I know the fun is just begining ! There is a God ! God Bless Tim ! Hoarders have more fun ! In my political satire I try to conform to the decency and good taste standards set by the Democrat party during the Reagan/Bush years ! Fuck Barack Hussein Obama ! Monedas 2011 Me happy ! http://trololololololololololo.com/

Stuart's picture

GLD shareowners are not entitled to the physical. GLD is merely a tracking index.   Anyone owning GLD thinking they're somehow entitled to physical didn't do their homework, cause they're not.  They've got a paper tracking share equal to 1/10 the physical price adjusted for the fees.  Nothing more.   

IBelieveInMagic's picture

This Kings News source looks very suspect to me. Looks like they are just spreading rumors and innuendoes to entrap unwary investors. I find this story completely unconvincing. I am losing confidence in Zero Hedge with this kind of information about CEF...

Mad Max's picture

If you want the official party line, try CNBC.  Avoid those tinfoil hat types at Bloomberg, too - they're almost as bad as bloggers.

Cognitive Dissonance's picture

Mad Max

How many time have I told you to STOP playing with those poor gerbils? You're torturing them to death with your constant poking and pulling and throwing.

Now put them back in their cage and leave them alone, NOW!

Mad Max's picture

Awwwwww MOM!, you know the gerbils like it.  Oh, ok, I'll put them down and let them alone.  But I want snakey-snakey to keep them company.

dumpster's picture

you believe in majic  wave the wand .. listen to FTV

 

i am sure you have missed all the detail before the king broadcast. 

are you a front for fox..

Crime of the Century's picture

Right - like FOX doesn't have wall-to-wall commercials for physical gold dealers...

ZerOhead's picture

Here's what looks suspect to me IBelieveInMagic. (Great name BTW!)

Catch the CFTC hearing video snippet where they try to explain the rationale behind all those institutional PM shorts... can you say price manipulation?... or is it merely just fraud?

http://www.globalresearch.ca/index.php?context=va&aid=18486

Gold...Bitches's picture

This Kings News source looks very suspect to me.

Says the person with the screen name "IBelieveInMagic"

THE DORK OF CORK's picture

I think we need to get our head around the fact that there seems to be the beginning of a clash between the banking elite and a possible new or older elite who are contesting the legitimacy of the present decadent Nero's who seem to be running this fiasco.

Now on balance I am with most of the  guests that come on King World news but if this is war then well.... the truth is the first casualty of war.

Because of the euro appreciation of gold  since I was buying last summer my PM allocation is now 80%.

But I shall keep the rest in short term bonds and cash as this could be a long war.

gmrpeabody's picture

I missed any slam to CEF, but agree with your assessment of King News. As to your being flagged for slamming ZH, well, suffice it to say that a great many of the trolls from the old Yahoo Finance message boards have found a new home.

snowdude's picture

I caved in and got myself an account here so I could respond to some of the misleading information in this interview... although it took two days to get the account so it may be too late for anyone to care anymore, but here goes anyway:

I work around the corner from the Royal Canadian Mint.  It is my client so I try to keep up with the gold industry to some degree, more lately than ever before.  The large Canadian charter banks (RBC, Scotia, CIBC, TD, BMO) are also clients so I am quite familiar with how they operate too.

Scotiabank (The Bank of Nova Scotia) is one of the big charter banks, all concentrated in downtown Toronto.  It bought Mocatta a few years back, which was an international gold dealer.  Now they refer to themselves as "Canada's only bullion bank" because they are the only one of the big charter banks that actually sells gold to the public.  The "bullion bank" label is just a marketing term.  In reality, you would be hard-pressed to call it a bullion bank at all.  They carry their inventory of coins and wafers and bars that they sell out of a trading desk in Scotia Plaza downtown Toronto and through an online service, so that is essentially what the "bullion bank" is - their inventory. There are many other such gold dealers in the country (ever heard of Kitco in Montreal???) and vaults with stores of gold.  After all, they make it here!

These banks are all primarily retail business in Canada, in large, modern office towers and relatively small vaults.  They are not equipped to store large volumes of gold bullion or anything of the kind. The only other bank with a visible store of gold in downtown Toronto is the RBC Headquarters (Royal Bank of Canada).  Their office towers are all glass and each pane of glass is dipped in a bath of 24k gold.  It looks nice but a window washer would need to be scraping for months to get enough to make a ring!

Mocatta also introduced gold "certificates" as have many other organizations around the world that work with gold or other financial instruments.  Even the Mint has introduced a pilot project with these types of certificates.  Contrary to what the guys in the interview claimed, there is nothing anywhere that says these certificates are for allocated gold.  In fact the literature is quite clear that it is for unallocated gold, backed only by the assets of the bank.  One of the selling points is that you don't have to pay for storage or insurance, again contrary to what the guys in the interview claimed.  If you do convert to physical gold, then you have to pay the full freight, which is what happened to them. 

In most of these cases, I don't believe these things are so much scams as they are mis-understood by the average investor who typically doesn't spend much, if any time looking into what they are buying.  That doesn't mean that these certificates don't involve risk.  Personally I viewed those gold certificates in the same light as "deeds to land on the moon" or "certificates of ownership of a star" that you can buy from novelty dealers.  But people spend money on those too!

Another comment made in the interview has been mis-interpreted in such a way as to undermine the credibility of CEF (The Central Canada Fund) by painting it with the same brush. CEF is one of many gold funds in the country, and around the world for that matter as it trades mainly in the U.S.  It started in 1961 in Toronto as a mutual fund holding Canadian equities.  In 1983, after the last gold boom busted, they decided to remake themselves as the "Sound Monetary Fund" and converted to all physical gold and silver.  Then they moved their management to Calgary where a branch of the CIBC (Canadian Imperial Bank of Commerce) had a giant underground vault, suitable for the conditions of the wild west.

CEF is one of the few funds that goes to great lengths to demonstrate that it possesses actual, unencumbered, fully allocated gold for its shareholders.  (Sprott is building another one.)  The gold holdings are audited twice a year by an independent auditor.  The prospectus is quite clear that no gold is leased, loaned or otherwise encumbered in any way.  The one risk I did notice is that when they issue new shares to raise funds, then buy more gold, they count the gold as holdings before they receive physical delivery, which may take some time.

Other than that, it is fully protected in the underground vault by herds of wild moose.  And if you get past them, you have to deal with bunches of savage Canadian beavers with the great big buck teeth.  If you happen to make it through those defences and get some gold and try to run away, as they say in the Alberta prairies: when your dog runs away, you can see him running for three days!  So in that time, the Mounties on horses will surely catch up to you.  After all, they always get their man.  And these days, once they do, they can marry him too.  That means two more gold rings sold, pushing demand up even higher!

Hope that helps.

omi's picture

GLD is not really redeemable. It's an accepted substitute in a delivery method.

Cognitive Dissonance's picture

"GLD is not really redeemable. It's an accepted substitute in a delivery method."

Sure, in the same way my anatomically correct blow up doll (Shelia) is an accepted substitute for my girl friend (the real Shelia).

BTW, Sheila doesn't know about Shelia so mums the word, OK?

MagicHandPuppet's picture

ha ha ha!  That's funny as hell.  Careful... I am too old to laugh this hard.

crosey's picture

Hide it well.

Remember the Whiskey Rebellion.  The government won and collected the taxes.  They have much bigger guns now, and far more of them.  You start shooting, they will shoot back until you are dead, and then they will take your gold.

Hide it v-e-r-y well...and get used to a vegetarian diet for a while.

fxguy's picture

And then when you need to sell it.... ???
Oops, sorry but all gold sales are illegal, don't ya
know? You must sell it to the US Gov for $250 oz!

You can delcare a loss on Form 1040-UPYRA55

 

Mad Max's picture

Nice form name.  Seems quite plausible.

Quite wrong on the gold price though.  Official US government gold price is about $39/oz.

dumpster's picture

fx guy

another i have no gold cuzz i am asset poor ,, and justifying too my self that i will br okay when things get grim,, maybe the fed will give you squat,, but  that is normal lol

the market will price it at a going rate . 

so best to not sell it to the gov,   

MagicHandPuppet's picture

It might be a good idea to buy a bunch of those gold-plated tungsten chips.  The goons won't know the difference.

Sam Clemons's picture

That is actually a  great idea. 

A Texan's picture

"If enough gold holders also happen to be gun owners, then a confiscation is unlikely."

 

I would say that there is a near identity of ownership between the two precious metals - gold and tubular steel.

 

I would further make an educated guess and state that most owners of both precious metals would be happy to make a substitution (like the cash instead of physical substitution), but they would substitute yet another precious metal (an amalgam, really) for the gold that the confiscators would like to receive.  Instead of gold, the gold owners would likely substitute copper-plated lead, and would be so eager to make that substitution that they'd send the copper-plated lead via airmail.

 

 

Attila's picture

DCRB

Some years ago we came up with a workable storage system: ie

We acquired a small gold mine, and left it unmined. Cheap storage. No theft.

Gummint leaves it alone as it might take WORK to get it.

Can't be removed from site without requiring months of digging & other hard work.

 

Anyone with better system please advise!

 

ATH

macfly's picture

Now that is really genius, and exactly the kind of lateral thinking that makes OH so inspiring, I'm off to stake my mining claim right now!

Oracle of Kypseli's picture

A friend of mine in the Smokeys, had buried (has several acres) a reinforced concrete drainage pipe 10' L by 6' in diameter in an incline (no water damage.) The dead end concreted in. The open side on the lower part was concealed, boarded and backfilled with heavy soil at 45 degree angle and planted. (dogs all over)

He kept the extra ammunition, extra long guns, PM's and food stuff.

 

 

The Disappointed's picture

Hope he's in good health. Or he trusted someone enough to tell them. Or left a map.

Did he have a hook for a hand and a taste for rum and parrots?

Just joshing you.

Mad Max's picture

It's a good idea, but if things get bad enough for confiscation, they'll nationalize your mine and pay you, if anything, only what it was worth without the minerals.

A_MacLaren's picture

If things get bad enough for the blatant violation of property rights, such as confiscating physical precious metals or firearms, or in the case of real property confiscation, TPTB should expect should extreme resistance, of the Charlton Heston kind.

http://www.youtube.com/watch?v=5ju4Gla2odw

 

jeff montanye's picture

confiscation is a poor term (i'm guilty too) for what is, at least, the precedent, which was required sale prior to revaluation.  it also doesn't make as much sense in a variable price market (as opposed to the fixed price market of the thirties).  from the evidence, the fed and other central banks intervene to depress the gold price, their banking allies short without holding the asset sold, etc. and have done so for decades.  it seems to me that the illusion is slowly dissipating at a time when central banks' (and bullion banks'?) bullion stocks are historically low.  this seems bullish.

BDig's picture

DoChenRollingBearing,

Could you please be a little more specific on what jurisdictions you speak of?  I feel like you're eluding to something important, but it escapes me.

Thank you,

DoChenRollingBearing's picture

I have a decent sized stash that is very secure overseas.  Very.

dumpster's picture

balony / this incessent yammer about what the government will do with the gold .  when about 3% of the population has squat,

your probably own zero ,, and make this huge noise ,

in 1930  even with a gold standard , nobody really turned in any gold ,

a lot of noise , 

its always those who know the least about gold have none ..cry out the sky is falling , if you own gold ,

this opinion of yours and a buck will buy you nothing

 

Shameful's picture

Yep. I'm more concerned about the rounding up of dissidents then I am of gold confiscation.  Not enough people have gold to make it worthwhile, and goldbugs tend to also be gun nuts.  But they are also generous, they will give free copper jacked lead to any unexpected unwanted guest.