Cheap gold and its African 419 heroes

Today’s modern Robin Hood is not active in England or for that purpose any part of what we
usually call the first world.

And it is not one Robin Hood. Actually we are talking about an inflation of Robin Hoods of
epidemic proportions. They all live and work in Africa, are smart, educated, know exactly how
people in Europe and North-America think, tick and work. They are ruthless and quite brutal.

And they are called – in Africa – the 419s, ‘419’ after the section of the Nigerian penal code
that prohibits that type of scam. Even outside of Nigeria.

The 419s are admired as the latter-day Robin Hoods in the impoverished West-African nations.
Public opinion is on their side and not in your favour.

To authorities the 419s present a difficult challenge as they try to rebrand their nations as
attractive investment targets to the international community, only to see their efforts
undermined by fraud and scam of epidemic proportions committed against potential investors
coming to check out local investment opportunities.

So what is the 419 fraud?

It is a real crapshoot for hopeful gold buyers who do not fully comprehend the gold business,
who do not apply proper risk management and who are lured into a trap by the promise of
cheap gold.

Basically, the victim is being offered cheap gold, usually at about half of the world market price.

An offer, which per se is neither unusual nor is it unrealistic.

In order to understand the business proposal of cheap gold, let’s have a look at the cycle of gold
from production to an investment grade gold bar:
This is an example of a gold bar, with a gold grade of 99.9999% produced by the well known
Swiss refinery PAMP. Mind the famous quadruple “9999” after the coma. This type of gold is
bought and sold at world market prices, which are based on the daily fixings of the famous
London Metal Exchange. And it is only this type of gold. Any other gold of a lesser grade is not
traded on the exchanges. And only to this type of pure gold the world market prices apply.

In order to produce that kind of gold, expensive industrial equipment and the Wohlwill process
will have to be used and applied. Taxes will have to be paid. It is absolutely expensive and time
consuming to produce pure gold bars that will be accepted by banks and specialized funds well
as governments as investment grade assets.

From that one can easily deduce that the local gold miners obviously cannot be paid the world
market price, but significantly less.
Africa is home to the planet’s richest known gold deposit. The Birimian Greenstone Belt, for
example, which extends from Ghana into Mali, Guinea, Burkina Faso, Sierra Leone, Guinea
Bisseau and other countries is host to some of the largest gold mines in the world consistently
producing many hundreds of thousands of ounces of gold per year. These gold mines are
owned by large multi-national companies.

Many or most of these gold deposits also produce rich alluvial gold deposits on the soil surface,
which subsequently – if found - is mined by the locals.
See image above, an example from Sierra Leone. These miners will typically sell their gold on
the site for around 30% of the world market price. This is the gold that is offered to you.

And this is, where the 419 fraud kicks in.

Let’s forget for a moment about the horrible working conditions on these mining sites, the child
labour, the use of slaves, the trade in underage prostitutes to keep local workers happy.

You will hear nothing of that from your friendly gold vendors.

You will be told that the gold is so cheap because it comes directly from the mines, without
intermediaries in between. That is true. The local miners simply do not get the full world
market price, not even closely, just because there is much more work and money to be invested
along the value generation chain until the production of an investment grade gold bar.

So that claim is absolutely valid and correct.

Therefore, if your counterparts had any real and honest intentions to do business with you in
the first place, all would be fine, and it would still be a viable business proposition.
But that is not the case with the 419s.

I am in the commodity business since many years and I have been checking out gold sellers in
several African nations on a number of occasions. I know that the African locals are wary
towards foreigners. They don’t like us because in their mind we foreigners are responsible for
their economic misery, a false narrative over and above happily promoted by local governments
to deflect attention from their own failures.
These countries are mostly Muslim, and even if you are a true Muslim believer as well , you will
be labelled in their collective minds as “infidel” just for being a foreigner.

So as soon as you as a foreigner set your foot into one of those impoverished countries you
must be aware that you are – in the perception of the local population – a treasure chest full of
cash, walking on two feet, and with a crosshair on your back.

In these countries where people are routinely killed for a can of sugar or a pack of cigarettes,
where a human life is worth less than a bottle of drinking water, most foreigners have no idea
of the constant danger to their life.
In our latitudes of developed nations, the idea to kill a human being simply because of a can of
sugar or a bottle of water only is reserved to the sickest of psychopathic killers. It is by no
means a daily occurrence.
However, if you learn to better know these impoverished countries, where half of the
population suffers from HIV, and the other half from Hepatits C, and where the general life
expectancy is less than 38 years, the low value of human life will not come as a surprise and will
make you think twice about your plans and actions.

My own appearance is such that I could easily blend into the local population in countries like
Afghanistan or Pakistan, a quality often used in military missions years ago. But, hey, my skin
still is not dark. And while I speak fluently English and French, I do not understand one syllable
of the local languages in the African countries. So often times, I would find myself in situations,
like in lunch or dinners meetings, for which I always had to foot the bill, being surrounded by
happily chatting, smiling and extremely friendly locals, patting my back, but with no ability to
understand any of their conversations.
So one day , I recorded one of those meetings, paid the front desk girl in my hotel 10 bucks (a
small fortune for her in a country where 600 USD yearly income per head is the standard, if at
all) and asked her to translate it to me. Her reaction: all was fine, they are good guys, their
intentions sincere and they were talking well about me.
Still, not entirely convinced, my sixth sense was flashing alarm signals. During my years as
special forces operator I acquired a sense for danger, which helped me to survive not only in
combat but also afterwards in business. And it was this sense that kept me awake in the hotel
bed. Something was not right.

I emailed the wav file to a friend from the intelligence community. Liz, a fiery brunette in her
thirties with deep Louisiana roots and accent, who would not take no shit from no one and
would always be there to extend a helping hand.

Two days later she called me.

“Rock, with which muutafuuckaz u mezzing around?”

“Get the fak outta there.”

As it turned out the friendly local hosts routinely referred to me as the “white pig” or the “dirty
Arab” in their conversations (I am Caucasian, and not an Arab as an FYI).

And their happy chattering during the meetings simply was their satisfaction regarding the
upcoming revenue to be extorted from me through their little scam. Their conversation even
mentioned local police as being on their side for any help they would need, hence Liz’
suggestion to better watch my six.

I changed hotel the same day and left the country on the next flight that very evening.

The U.S. embassy in Freetown, Sierra Leone, in 2019 said that six U.S. nationals have lost up to
$350,000 (215,862 pounds) each in scams in the past six months. European embassies have
reported similar cases without giving details of the extent of the losses.

It is mind boggling.

How would a grown-up adult hand over to an unknown person in a country 10,000 miles away
from his home shores hundreds of thousands of dollars, hoping that the receiving person would
return with gold bars a couple of hours later.

The response is that the 419s can be extremely convincing. They apply real trade craft. The are
– while not formally trained – extremely skilled psychologists. Yet that should nnot be a reason
to drop all usually safeguards and precautions.
In these countries as soon as the locals call you “brother” , you, a foreigner unknown to them,
and not part of their family, all alarm bells should be going off. Most foreigners take pride in
being called “brother” and perceive it as a good sign.

It is the contrary.

The word “brother” is used to address particular intimate friends or very close family members,
and certainly should not be used in an honest social business environment to address you. But,
hey, this is part of their game to lure you into their web of lies and make you feel comfortable.

They will show you real gold, that you can verify with your own device in whatever way you
please.

So how does the 419 fraud unfold?

There are two ways:

One is the cash and carry fraud: they show you real gold, they give it to you on the spot upon
payment in cash of the agreed on price (which is usually half of the world market price). You
will have the real gold in your possession.
Then, when leaving the country, at the airport either at the passport control or at the latest at
the customs check, customs officials or airport police, all in cahoots with your friendly gold
vendors, will arrest you for illegal gold possession, because your documents are allegedly
phony or you are allegedly guilty of something else (whatever they are in a mood to make up at
that particular point).

This scenario has two outcomes: if they want to get rid of you, they just put you on your flight
and keep the gold, or if they think they can extort more money from you will be led in
handcuffs off the airport and thrown into some local jail, until you are ready to wire more
money to some local scumbag lawyers in exchange for your freedom. That is a real crapshoot,
and unless you are willing to shoot your way out of jail, you will be in for a shitload of monetary
losses.

The other way is the advance fee or down payment fraud.

In this scam set up the 419s ask you to pay them a 20 or 30% down payment fee for your gold
purchase for the payment of mining taxes to the government and to prepare your gold
purchase for customs. They will even lead you to legitimate government customs offices or
government tax bureaus, where you will receive official payment receipts. These payment
receipts, however, are worth nothing, as the government officials issuing those are all in
cahoots with your friendly gold vendors.
It is an unconceivable web of corruption, lies and fraud of epic proportions, that has penetrated
all levels of government in these countries, and where you as a foreigner stand no chance.

Of course whatever money you pay, will be permanently lost. You, the “white pig” or the
“infidel” have no legal aid and no judicial resort available to defend yourself against these
gangsters. You would run a serious risk of being incarcerated for calumny, if you dare to raise
your complaint in a local court of law.

Down payments in the gold trading business are a common business case, but only among
known parties and based on a secured basis, like for example letters of credit. And certainly not
to local unknown guys in an impoverished African nation. You will be told that African banks do
not do letters of credit. That is bullshit. Of course all major African banks do it, but only for
respected customers who pass the usual due diligence and compliance check. The 419 scum
bags of course would never pass preliminary checks.

Make no mistake. No one in any of the West- or Central-African countries is interested in

For your safety and well-being you have to assume that the contrary of what you are being told
is the truth, and that every piece of information presented to you is lied, fabricated and made
up. This is the unfortunate truth for foreigners trying to do business in the African nations,
particularly in West- and Central Africa.
In the image above, some of the real 1 kg gold bars can be seen that I was able to inspect in
West-Africa. Of course they will be shown to you only for marketing purposes and to give the
419s the appearance of a legit business. There is no way you will be allowed to leave the
country with one of those beauties, even if you paid the full world market price.

On one of the occasions, and that one was in Freetown, Sierra Leone, I was told that I would be
driven to a supposedly well known gold seller, where I would be able to inspect and verify the
gold.

As always it was impossible to extract from the guys an exact address, even less the full name
of the alleged vendor or his business. That was already normal.

But what was not normal that on that particular occasion the SUV suddenly pulled over on the
main street and hung a sharp right into an alley, and drove through a couple of side streets
until we came to stop at an abandoned remote location among large trees and some brick
buildings in a poor state of repair. It took not long and 4 guys approached the SUV, in addition
to the driver of the SUV and two locals with whom I had been going back and forth on the
matter of gold purchases. So I had 7 guys against me. None of that would have raised my heart
rate above 80 back in the days of SOF missions. But I was getting rusty, maybe a bit more than
rusty. I felt the pulse in my head.

They approached the car, and the eldest, a grey beard with a ceremonial face, lost no time.

“Salam Aleikum brother, how are you.”

“Aleikum Salam.” I responded and added “Happy Ramadan”.

He ignored my well wishes and pulled out a gold bar of approximately 1 kg.

“Brother, you have agreed to buy gold, so I came here to meet you, to show you the gold.
Would you please verify, that it is for real.”

Of course I never agreed to anything before. I never ordered gold. But that seemed irrelevant at
the moment, surrounded by 7 locals in a remote and abandoned side street of not such a nice
neighbourhood of Freetown.
It was clear that they would not let me leave without extracting all the money I had on me and
then some.

“Sir, I have not agreed to anything so far and I was not told that we would meet here”.

My local contact, Ibrahim, looked at me and at him and murmured something in local language
that I couldn’t understand.

They all knew I had an expensive piece of equipment, a portable spectrometer, on me.
Mr. Grey Beard was unimpressed.

“Brotha, I need you to pay me now 3000 dollars for the mining taxes. I have borrowed this gold
bar from someone, as I was informed that you are a serious buyer. I have come a long way and
spared no expense because of you. I will use the 3000 USD to pay the taxes, hand you over the
paperwork in 2 days and then upon receipt of the gold you will pay me rest.”

That was as clear and serious as it could get. There was no time to lose.

“Of course Sir. Let me verify the gold here with my device and then maybe we can find a
solution.”

I pulled my backpack from the car seat, put it on my lap, and made sure that everyone saw it
and took my time unzipping the black 511 backpack. As soon as the mobile Bruker device
became visible, so was a 9 mm Berretta that I was lucky enough to source from my European
hotel owner upon my arrival. Everyone backed off, the 4 guys left without a word and I was
returned to my hotel with some niceties and apologies for any misunderstanding.

“I don’t understand how a fully grown man can be convinced into parting with $700,000 for
gold that is not in their possession,” said Stribey Edward Logan of Sierra Leone’s Transnational
Organised Crime Unit.

Well, it is incomprehensible indeed.

Douglas Sun at the U.S. embassy simply urges expatriates “to think twice about paying huge
amounts of money up front.”

I have changed my business model in the meantime, which excludes any dealings with African
nations.

Bottom line: the gold is there, it is cheap and it is for real. The obstacle is not the non-existence
of the cheap gold but human trash and scum bags for whom foreigners only exist to part them
from their money with all sorts of illegal tricks and traps – in cahoots with local police, local
customs and local officials.

Advice: stay away from West- and Central Africa. It is a loser’s game for foreigners.

More real life stories from the world of commodity trading coming up: Latin-America, the
Chinese gangs operating and controlling West- and Central Africa, and tales from Afghanistan