Nasdaq-listed Kingold Jewelry says it’s under investigation for using fake gold to secure US$2.9 billion of loans

Kingold Jewelry allegedly passed off 83 tonnes of gilded copper bars as gold bars to secure 20 billion yuan (US$2.9 billion) of loans in China

The Wuhan-based jeweller faces lawsuits in China and the US, and all its bank accounts had been frozen

Reading Time:2 minutes

Kingold’s unfolding scandal has shaken investor confidence. Photo: Dickson Lee

Published: 12:18pm, 16 Jul 2020Updated: 8:36pm, 16 Jul 2020

Kingold Jewelry, the Nasdaq-listed company that used fake gold bars to obtain loans in China, said it is under investigations in its home country after the Chinese government declared zero tolerance for financial fraud to head off a US law for kicking fraudulent Chinese companies out of US markets.

An investigation is under way in Wuhan, where the producer of household ornaments and jewellery is based, Kingold said in a filing to the US Securities and Exchange Commission, without elaborating.

The company allegedly used 83 tonnes of gilded copper, passing them off as gold, to secure 20 billion yuan (US$2.9 billion) of loans from more than a dozen Chinese financial institutions.

Kingold’s unfolding scandal, the second since Luckin Coffee’s US$310.7 million accounting fraud in April, has shaken investor confidence of US-listed Chinese companies. Luckin Coffee’s chairman was sacked and a liquidator was appointed to salvage the company.

Some US politicians have seized the opportunity – amid an election year in the US – to legislate for the expulsion from US capital markets of all Chinese companies that refuse to have their accounts audited by US overseers.

Kingold said it had been served with default notices on about 10 billion yuan of loans, as the adequacy and integrity of the “gold” assets used to secure those borrowings are in dispute.

The company and its chairman Jia Zhihong have also been involved in several legal proceedings related to loan disputes with lenders. As a result, all of Kingold’s bank accounts have been frozen, according to the filing.