Michael de Guzman,a Filipino geologist, was struggling to get recognition from his employer. So, he devised a plan to get rich
He would convince the world that he had found gold in Borneo. But first he needed someone with credibility to corroborate his story
Enter geologist John Felderhof, who immediately got excited about the news. De Guzman convinced Felderhof that they needed an investor
De Guzman pushed for an investor who had a hunger for risk and wasn't going to be asking questions
Felderhof recommended a Canadian businessman named David Walsh
De Guzman and Felderhoff wined and dined Walsh in Indonesia, and immediately got him to commit $80k to the project
Now that he had financing, de Guzman assembled a team and started pulling core samples out of the ground
After the core samples were crushed and collected, de Guzman made sure he had some privacy with them before they were shipped off to be analyzed
De Guzman filed gold from his wedding ring and mixed the flakes in with the rock samples. This scheme is called "salting" and it happens frequently
De Guzman used a ratio of around 3oz of gold per ton of rock, which was small enough to not attract too much attention. The labs were convinced and gave Bre-X the thumbs up
Shares of Bre-X, a penny stock, exploded on the Alberta Stock Exchange
However, de Guzman could file down his wedding ring for only so long
So, he started paying locals for their gold, which they got through panning. De Guzman would buy $61k worth of this panned gold over the next two and a half years
Skeptical investors sent in an independent auditor, who noticed the rounded edges of the panned gold. But de Guzman explained it away with something called "volcanic pool" theory
The auditor bought it, and the stock soared
De Guzman, Felderhoff and Walsh sold off a small portion of their options for around $100 million
However, all of this wealth creation caught the attention of Indonesian President Suharto, who wanted to get in on the action
Right away, the Indonesian government revoked Bre-X's exploration permits
The Indonesian government's intervention was the beginning of the end of the Bre-X fraud
With the government hot on is tail, de Guzman allegedly set fire to his office, destroying all of his records
The Indonesian government eventually left Bre-X with only 45% control of the mine, and the rest was left to be run by Freeport McMoran. Bre-X's market cap plunged by a billion dollars
To offset this, de Guzman ramped up the amount of gold flake showing up in the core samples, and the stock soared again. The shareholders were pleased
But after much drilling, the miners from Freeport McMoran couldn't find a flake of gold. They were suspicious and they demanded that de Guzman explain
De Guzman boarded a helicopter that would fly him to the site. The only other person in the helicopter was the pilot
According to reports, the pilot turned around at one point and de Guzman was gone. Everyone concluded that he jumped
Days later, the Indonesian Army found de Guzman's body, which they said was badly decomposed and mostly eaten by animals. The family was not allowed to see the body
With no answers and no gold, the stock went to zero.
Walsh denied knowing anything about the fraud. He soon moved to the Bahamas where he died of a heart attack two years later
Felderhof, the only one who was charged of anything was acquitted. He now lives in the Cayman Islands, which has no extradition agreement with Canada regarding white collar crimes
People think that de Guzman is still alive. One expert noted that Indonesia is one of the easier places to disappear. Apparently it only costs a few hundred dollars to buy a dead body
Here are the links to MasterMinds videos
Gold isn't even the most expensive stuff on earth...
