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Legacy of war in Asia

South Korean firm backflips on buried treasure ‘worth US$133 billion’ after discovering Russian warship that was scuttled in 1905

The company has yet to obtain government permission to raise the Dmitrii Donskoi, which it said divers found more than 400 metres underwater off the eastern island of Ulleung

PUBLISHED : Thursday, 26 July, 2018, 3:10pm
UPDATED : Thursday, 26 July, 2018, 3:10pm

A South Korean company on Thursday backed off its claim to have found a sunken Russian warship with an enormous cargo of gold as financial regulators began investigating whether the outlandish treasure tale involved stock market fraud.

The Seoul-based Shinil Group said it did not know if any gold coins and bars would be found inside the sunken ship it identified as the Dmitrii Donskoi, which sank 113 years ago. Company officials previously claimed 200 tons of gold worth 150 trillion won (US$133 billion) would likely still be aboard the vessel.

“There’s no way for us to figure out whether there would be gold coins or bars on the Donskoi, and if there is, how large the amount would be,” said Choi Yong-seok, Shinil’s president, in a news conference in Seoul.

The company has yet to obtain government permission to raise the ship, which it said divers found more than 400 metres underwater off the eastern island of Ulleung. It’s also unclear whether the company would able to claim ownership of the ship’s assets, even if it manages to retrieve them.

Experts said it’s unlikely that the 6,000-ton Donskoi, a thickly armoured warship with more than 12 artillery pieces, 500 sailors and presumably 1,600 tons of coal, would have had room for 200 tons of gold, which would be double the current gold reserves at South Korea’s central bank.

There’s no way for us to figure out whether there would be gold coins or bars on the Donskoi
Choi Yong-seok, Shinil president

There were also questions about the gold’s worth being estimated at US$133 billion – the Bank of Korea’s 104 tons of gold reserves are valued at about US$4.8 billion.

Russian officials have said any gold on board likely would have been in the form of coins to pay the ships’ crew.

Choi offered a “sincere apology” for the company’s “unverified” claim of 200 tons of gold worth US$133 billion possibly being on the ship, saying that it was based on “speculative” materials and media reports. He said Shinil still hopes to find something of “sufficient financial value” and that the teams who studied the wreck reported finding “multiple bundles of boxes firmly fastened with rope.”

However, Jeff Heaton, a Canadian pilot who operated one of the submersibles that discovered the vessel, told reporters later in the news conference that no such boxes were seen.

An official from South Korea’s Financial Supervisory Service said on Thursday that the regulator has started investigating allegations of stock market fraud surrounding Shinil and another local company, Jeil Steel.

Choi, whose investment company owns 50 per cent of Shinil, has recently agreed on a deal to become the majority shareholder of Jeil.

After Shinil’s initial announcement on the Russian ship, Jeil’s stock prices rose by 30 per cent on South Korea’s KOSDAQ market last Tuesday and continued to rise the next morning before Jeil in a regulatory filing said it has “no relation to the treasure ship business”. Jeil’s stock prices have since plummeted amid rising scepticism over the claims of gold.

The FSS official, who didn’t want to be named, citing office rules, said the regulator was looking into various possibilities of deceptive practices, including whether investors were induced by a deliberate distribution of false information. Choi denied any wrongdoing.