World's Oldest Gold Trader Fails To Find A Buyer

Last October, we reported that the world's oldest gold trader was for sale after a massive money laundering scandal may have terminally crippled one of the most iconic names in the business. According to the Financial Times, Canada’s Bank of Nova Scotia was exploring options for its gold business ScotiaMocatta, including a possible sale of Canada's most popular precious metals trader. As reported at the time, Scotiabank made the decision to sell ScotiaMocatta following a massive money laundering scandal centered on a U.S. refinery that involved smuggled gold from South America.

The ScotiaMocatta business, a mainstay in PM trading, is one of London’s main gold trading banks and is being sold by JPMorgan.

As the FT further reported, while physical gold trading has been in a cyclical decline in recent years, the “straw that broke the camel’s back” in prompting the sale was Scotiabank’s lending to Elemetal, a precious metals refinery in Dallas. Scotiabank was one of its biggest lenders, they said. The problem emerged in March, when US prosecutors accused workers at a subsidiary of Elemetal, NTR Metals in Florida, of a money laundering scheme using “billions of dollars of criminally derived gold” mostly from Peru.

This is where the story took a turn into a slightly surreal detour.

NTR imported more than $3.6bn of gold from Latin America between 2012 and 2015, the court documents allege. Two of the accused, Samer Barrage and Juan Granda, pleaded guilty to a charge of money laundering in plea deals. After the story came to light in March, Elemetal was kicked off the London Bullion Market Association’s “Good Delivery List” of gold refiners.

To be sure, this was an almost instant death sentence for the company as buyers will usually only buy gold from a refiner on the list. Indeed, in the same month, New York’s Comex futures exchange said it was no longer taking gold from Elemetal for delivery against futures contracts in the world’s biggest gold futures market.

And this is where the scourge of gold rehypothecation emerged, as in the scandal surrounding Elemetal, it became impossible for holders of Elemetal gold to sell the gold bars on, leaving them sitting in bank vaults, according to traders quoted by the FT. Buyers are reluctant to take the gold, given the investigations.

This means that hundreds of millions in loans made to Elemetal by ScotiaMocatta are suddenly stuck in limbo. It also means that one of five bullion banks that settle gold trades in the London market, the world’s largest, has effectively been blackballed. It was built on the 1997 purchase by Scotiabank of Mocatta Bullion, which traces its roots back to 1671. And with Mocatta crippled, Scotiabank, which has the biggest foreign presence of any Canadian bank, is focusing its international strategy on the Pacific Alliance, a Latin American trade bloc comprising Mexico, Peru, Chile and Colombia. It will also hope to find a willing Chinese buyer for the gold trading operation.

Well, fast forward 4 months later, when the sale process of the terminally tainted Scotia Mocatta appears to have failed, because according to Bloomberg, Bank of Nova Scotia "plans to keep" its ScotiaMocatta metals trading business, ending months of speculation on a potential sale.

The Canadian bank wasted no time to give the failed sale process a favorable spin:

"We recently concluded a strategic review of this business and I’m pleased to confirm that most of our key services and our key markets and key clients will be continuing," Dieter Jentsch, group head of global banking and markets, said Tuesday on a conference call with analysts.

The bad news: Scotia Mocatta will now see massive layoffs: "We will be exiting some markets, we will be simplifying our product suite, and we’ll be much more judicious about our allocation of capital and liquidity."

As Bloomberg reminds us, Scotiabank acquired the London Metal Exchange gold-dealing unit from Standard Chartered Plc two decades ago.

The business has more than 160 employees and 10 offices worldwide, including New York, London, New Delhi, Mumbai, Hong Kong, Shanghai and Singapore, according to the bank’s website.

And so the chapter on the world's oldest gold traders comes to a close: ScotiaMocatta traces its origins to 1671 and is one of a dozen firms behind the London gold fix. It’s also part of a group of nine banks that sets the silver price in London. And, in light of the ongoing scandal that may have permanently tainted Scotia, preventing it from winning new warehousing business, the fabled history of one of the most venerable precious metal traders is likely to come to an end in the very near future.

Comments

LawsofPhysics Tue, 02/27/2018 - 11:22 Permalink

once this starts happening to commodity traders in the essential commodities area, then shit gets real (you know, real stuff required for survival).  not before.  Gold, to 99.9% of the population is irrelevant, even though it still remains the preferred collateral at all central banks...

"Full Faith and Credit"

same as it ever was!

nope-1004 BaBaBouy Tue, 02/27/2018 - 11:47 Permalink

Looks to me like someone on the inside (@ NTR) knew the fraud and simply wanted to take for themselves that which Scotia Mocatta has been doing for years to PM investors.

I feel so bad that a bank got taken at its own game.  And I find the arrogance by that bank to be unbecoming, as expecting to find a "buyer" of your tainted shit means you are delusional about your self worth and actually believe "you're richer than you think".

lol.  And Fuck you Scotiabank.

In reply to by BaBaBouy

Buckaroo Banzai LawsofPhysics Tue, 02/27/2018 - 11:40 Permalink

Let's be crystal clear on what the message is here: all money laundering will be done in fiat dollars, using approved banks like BofA, Wells Fargo, HSBC, etc., to ensure all profits from such activities are consolidated under our (((watchful overlords))). Trying to get around this system by using competing forms of money laundering--i.e., gold-- will be squashed mercilessly.

Obviously the message went out that Scotia Mocatta must be punished for its transgressions, that's why no buyers materialized and Scotia is being forced to eat the full loss as they are forced out of this business entirely.

In reply to by LawsofPhysics

Buckaroo Banzai opport.knocks Tue, 02/27/2018 - 13:09 Permalink

Only idiots would even think to use Bitcoin for money laundering. All transactions occur on a public ledger, and it is a pseudonymous--not anonymous-- protocol, which means when enough effort is applied, IRL identities can be discovered. Of course, back when few people knew what Bitcoin was, it was much more suitable for illegal activities. But now it's becoming clear that it's a poor choice for tax avoidance and illegal activity in general, because unlike centrally-controlled private-ledger schemes like the (((global financial system))), Bitcoin's public ledger and pseudonymity actually promotes open and honest behavior.

Privacy coins like Monero are better candidates for money laundering activity, but the problem with that strategy is, there is not enough liquidity or market cap in those coins to support any kind of meaningful money laundering.

The cryptocoin space is extremely confusing to (((them))), and they will continue lashing out at it ineffectually as they struggle to come to terms with it.

In reply to by opport.knocks

HRClinton Tue, 02/27/2018 - 11:31 Permalink

Scotia Moarcata could simply sell the gold division or its gold to CC buyers.

I got some HODLed BTC for the right price and conditions*. Or I'll pay with XMR upon COD/FOB.

* Private transaction, conducted outside of Canada or US.

Son of Captain Nemo Ink Pusher Tue, 02/27/2018 - 11:56 Permalink

And what does the Chairman of that "reputable" entity say to all it's current and future investors?...

We regret to inform you that better then 2/3 of our Precious Metal holding(S) have been loaned out for the last 10 to 15 years and that if there should ever be a "run" on those account(s) with more litigation to secure physical holdings that are rightfully the owners YOU'RE IN A WORD "screwed"!!!

In reply to by Ink Pusher

WIZARD OF OOZER Tue, 02/27/2018 - 11:35 Permalink

They are not the oldest.  Egyptian texts cite gold trading in 3200BC and it probably went on long before that.  Yogi would not approve of this type of bragging by a corrupt bank.

 

Dragon HAwk Tue, 02/27/2018 - 11:35 Permalink

Well if they are stuck with that gold I am sure they can find a buyer at 50% spot,  or maybe they are stuck with the loans that were using the Gold as Collateral. hmmm

Ink Pusher Tue, 02/27/2018 - 11:36 Permalink

I wouldn't be at all surprised to witness a snap weekend backdoor after midnight deal that flips this market into an unstoppable rampaging bull once the scope and depth of the actual manipulation is realized and acted upon immediately by those well positioned few that are poised for the imminent and now seemingly unavoidable return to a Global Gold Standard.

*We won't see it here on the ground until a few of the big dogs stand fast for full delivery without hesitation or reservation.

 

 

GRDguy Tue, 02/27/2018 - 12:50 Permalink

Hmmm, one of the world's oldest gold traders.

One heck of a long time to lie and steal from those stupid enough to do business with it.  Had they been honest traders, they wouldn't be in this trouble in the first place.  

moonstears Tue, 02/27/2018 - 13:00 Permalink

So,we've read for years how actual gold PAPER is levered (double/triple counted) to actual physical gold, sometimes/some-banks, well, this can be many, many times over. Scotiametallica wants to sell fuckin' worthless/un-gold-backed paper, and we're to be surprised. I guess their pants were down when they were way toooooo levered. JMO

Davidduke2000 Tue, 02/27/2018 - 13:47 Permalink

who would want the liability that scotia has in the fraud and serious manipulation of the gold market., China opened a brand new trading desk instead of buying this fraudulent old operation.

tropicthunder Tue, 02/27/2018 - 14:12 Permalink

Doesn't take a fucking genius to figure out that Gold only trades within the confines of a rigged casino.

Gold price should be north of $5000 while it languishes and is suppressed by TPTB.

Crypto is simply the future of finance and of REAL WEALTH...

In.Sip.ient Tue, 02/27/2018 - 15:12 Permalink

Translation:  We "finally" figured out that gold,

regardless of whatever local "laws"  you apply is

worth something more than the opinion of a

US court.

 

So we're keeping the business!