How The Bre-X Gold Mine Scandal Swindled Thousands - Masterminds - Fools Gold

[Music] one man masterminds the largest gold mining scam in history surely one of the biggest frauds in the history of the world probably the biggest mining fraud of all time he outwitted scientists analysts and the world's leading investors there was always some science backing up this fraud he turned a penny stock into a billion dollar scam and made himself Milius find out how next on masterminds [Music] [Music] [Music] on December 13 1993 a lone prospector entered the darkest jungles of Borneo and discovered the biggest gold strike of the 20th century these series of jungle Hills Indonesia which all have been formed by a volcano relying on top of a pool of gold the prospectors staked a claim on behalf of a small mining company named bre-x he ordered rock samples drilled and sent for testing it was some interesting poor results and it seemed like this could be one of those junior plays that made people a lot of money independent auditors assessed the size of the gold deposit as astronomical they started to realize that they had what they thought was an elephant deposit a great big puddle of gold bre-x stock took off like a rocket the prospector used the money to expand his operation he cleared hundreds of acres of jungle and brought in sophisticated excavation machinery the analysts on Bay Street and Wall Street got caught up in the excitement and every time they published more details about this gold find in Indonesia the market capitalization of the company the size of the company would jump this company went from $1 or $2 to 286 dollars this was the largest gold deposit in the world back in Indonesia the prospector kept uncovering more and more gold gold was trading at $350 u.s. announced if you multiply it out it's about seventy billion dollars you ask fueled by greed everyone from boardroom executives to middle class suburbanite wanted in on the action everybody wanted to be the suitor to walk down the aisle with bre-x even the corrupt indonesian government tried to muscle in but what no one knew was there was no gold not one ounce the lone prospector cashed in his company stock options and made off with millions leaving investors devastated people who have basically put a lot of their life savings into bre-x lose everything and I know of several individuals who committed suicide the prospector had engineered an unparalleled gold rush outsmarting scientists analysts and investors his name was Michael de Guzman the question is how did he do it Michael de Guzman has convinced the world to invest in a gold mine that isn't there turning a penny stock into a billion dollar venture and lining his pockets with millions [Music] michael de guzman was a filipino geologists who worked in indonesia for years the Guzman struggles for recognition in an industry dominated by large American mining companies like the Guzman knew he was smart he had fabulous marks he had an engineering degree but he never got a great job he never got a crack-addicted a great job it's very difficult for the Filipinos even with extremely good engineering training to get senior jobs with the big mining companies while exploring the jungles of Borneo de Guzman devises a plan to make himself rich unable to get the support he needs to find a gold mine he decides to invent one michael de Guzman was going to get the wealth that he could never aspire to otherwise give Guzman reasons that the most convincing site for the world's largest gold mine is on the Indonesian island of Borneo in the area around Indonesia as an area which is quite unusually rich in gold gold mines are associated with volcanic activity quite a bit to areas where you get volcanoes people find gold mines de Guzman concocts a geological theory to capitalize on what the experts already believe and the theory essentially was where there are extinct volcanoes you're going to kind of a plug of minerals like gold that are fairly close to the surface now de Guzman must find someone with credibility to sell his idea to the world he targets geologist John Felder Hoff John Felder hafiz the very sort of person you would imagine that would be crazy enough to go through the jungles of Cala Montana or Borneo wearing hip waders and looking for gold they had actually a well-established reputation of having discovered the gold mined in Indonesia de Guzman convinces Felder off to find a foreign investor who's willing to take risks and not ask questions Felder Hoff recommends a businessman from Western Canada David Walsh was this promoter he'd been bankrupt he'd been sort of living out of the trunk of his car he was the kind of guy who was always talking up a story Walsh has flown to Indonesia where he's wined and dined in the finest Hotel in Jakarta Walsh was at a point where he was looking for some promising properties and he spent basically his last few bucks to take a trip to Indonesia with nothing more than a few rocks maps and some questionable data de Guzman sells Walsh on investing 80 grand on a property in Borneo that he's never even seen it's called boo sang the thing that made the bre-x fraud credible in everybody's eyes was that one of the largest gold mines in the world is in the Indonesian islands about 70 miles away from what became Hussein in exchange for their work exploring boo sang de Guzman demands stock options for himself and Felder HOF now de Guzman sets out to turn this penny stock company into a corporation worth billions [Music] he starts by hiring a young Filipino staff over which he has total control the person really in charge on site and who's sang was Michael de Guzman de Guzman orders his team to drill core samples once extracted the core sample is split into typically half is stored on-site the other half is then crushed and sent to a lab to be tested determining how much gold is present but because de Guzman knows the property has no gold he employs an age-old Mining trick called salting so thing the first for adding gold to the or usually what would happen is you'd have a gold mine and then you go there and you take two gold nuggets sprinkle it around the way you'd sprinkle salt around de Guzman orders the crushed rock moved to a locked shed where he's sure to have absolute privacy inside he devises an ingenious method of salting the samples with gold filed from his wedding ring adding it to the ground up rock as far as I know that's not been done before that was quite a that was a novel twist the challenge to Michael is then taking 40 pounds of rock figuring out exactly how many gold flakes should go in there in other words there's three ounces of gold per ton of rocks so he's got to do a fair amount of division and he's got a carefully weigh out his gold if he'd grabbed teaspoonful and chucked it in the gold Gray would have been phenomenal he would have gone it would have attracted attention do Guzman's calculations are perfect the lab results suggest high levels of gold without raising suspicion de Guzman has his frontman john Felder HOF called David Walsh at his home in Western Canada and tell him the good news the lab results are the equivalent of a hot tip the market came to really look forward to these results you know there'd be a big excitement Walsh would say on Tuesday we should have coal you know core results for you Tuesday would come sure enough there'd be 10 or 12 new holes as each consecutive lab result is posted it appears that more and more gold is being found in boo sang investors rush to buy bre-x shares listed on the Alberta Stock Exchange in Canada there's so much drilling at boo sang that de Guzman needs a larger supply of gold in order to keep salting the thousands of samples there's a lot of local Indonesian natives who make their living or at least a part of their living by panning for gold in the rivers Michael befriended this fellow and started buying gold often so over a period of about two years Michael bought about sixty one thousand dollars with the gold off his guy meanwhile investors anxious to get in on the deal send over an independent auditor to review all de Guzman's records the auditor demands to see to Guzman's core samples but de Guzman hasn't saved half the Sanders they did split their core oh right but they only kept at ten centimetres out of every meter that's very unusual to prevent the auditor from becoming suspicious de Guzman is ready with an explanation he cites a phenomenon called the nugget effect in which the gold is distributed unevenly de Guzman insists he must crush all of the sample in order to get an accurate reading the key was crushing a polar call nobody could check right having pressed up over the call basically they destroyed the evidence but when the auditor takes a closer look at the samples he's suspicious about the river gold purchased by de Guzman the gold gypped get from panning in a river looks quite different from the gold that you find at the bottom of the Goldman River Gold gets rounded around the edges the flakes of gold are shaped by the forces of the water and the weather did Guzman uses his theory of volcanic pools to explain why this kind of gold is precisely what you would expect at boo sank within hours the bre-x website announces the successful audit and the stock rises dramatically you could watch this stock will go from $20 to $30 in the space of three weeks building on his success with the auditor do Guzman now moves to drive the stock price even higher they looked at their maps and they said okay well if there's gold here maybe they'll be gold over here as well and that's when they got into boozang to do Guzman finds enough surface gold to convince David Walsh to finance drilling for what he claims is a second massive gold deposit once again the Guzman has Felder off fire off a message to David Walsh we've got a monster by the tail Walsh pounces on it he applies for Bree X to be listed on the Nasdaq and the Toronto Stock Exchange Wall Street and investors out swear an analyst elsewhere we're totally onside were totally enthusiastic were totally hypnotized by the rising stock price by the rising claims of Bri X now de Guzman makes his boldest claim based on drilling results from boo sang to he declares that bre-x has the largest gold deposit in the world the investors just looked at the rising stock price and said this must be real having built bre-x into a company worth six billion dollars and with its stock price that nearly three hundred dollars a share it's time for de Guzman to start cashing in he and his team sell enough shares to be rewarded with over 100 million dollars when Felder Hoff and Wynn Walsh and Wendy Guzman started selling a part of their holdings but not all of it people just figured well that's just guys who've had a tough run all their lives and they're just taking else insurance de Guzman is now worth millions but what he doesn't know is the Indonesian government is about to make a move that threatens to reveal his scam [Music] Michael de Guzman has pulled off the biggest fraud in mining history he's fooled the world's leading investors turned a penny stock into a billion dollar venture and lined his pockets with millions but he's now facing a real crisis the beginning of the end for bre-x was problem in Indonesia the Indonesian government which is hideously corrupt decides to challenge free X's claim to this fabulous deposit in August of 1996 the Indonesian government revoked spree X's exploration permit and opens the property to other mining companies the government itself was going to get very much involved in the ownership of the deposit and they were going to invite who they wanted to see to develop a deposit so what you saw unfold in a rather ugly fashion between the summer of 1996 and the spring of 1997 was this fight amongst major companies for a piece of the action michael de guzman knows his drilling records will soon come under scrutiny from the other mining companies a move that's sure to reveal the bre-x fraud desperate he destroys all his records at boo sang claiming it was an accidental fire what went up in smoke that day would ultimately help cover the trail of the conspirators that did this from the Indonesian government forces bre-x to accept a new mining partner freeport-mcmoran from now on bre-x owns only 45% of hussein when news gets out bre-x stock drops 1 billion dollars but de Guzman counters he releases new drilling results that dramatically increased the estimated gold reserves underground they had previously said that they had 57 million reserves and they increased that to slightly over 70 million reserves given that the ownership that they had a percentage went down to make the value be the same they had to increase the reserves bre-x stock rises again shareholders are thrilled in the spring of 1997 de Guzman and his team are invited to be guests of honor at BRE X's annual shareholder meeting in Toronto Canada Michael de Guzman made a presentation as part of the pre X annual meeting to talk about what he found there talking about what the different girl results and proven that was underneath the ground he was able to stand before shareholders with this fabulously expensive stock a company is worth five million dollars they said look we did the best deal we could under the circumstances we're all rich isn't this great he's wildly applauded considered a hero his theories of mining even though they were slightly unusual seemed to be validated by the results but on the other side of the world Bree X's new partner is anxiously drilling for gold only yards away from where de Guzman had drilled and their samples came up empty they weren't finding the gold that Michael de Guzman had said was their de Guzman got the phone call we don't seem to find any of the gold you say is there get your story behind back to Indonesia pronto pal and explain this to us after three years and billions of dollars time is running out for the mastermind behind the world's largest fraud when three x's powerful new partner doesn't find gold at boo sang Michael de Guzman is forced back to Indonesia the next morning he climbs into the back of a helicopter driven by a Indonesian Air Force officer takes off over the jungle he's about 400 or 500 feet in the air over some of the deepest rainforest in all of Indonesia and the pilot looked into the backseat and de Guzman was gone Guzman had jumped out of the helicopter apparently three days later the Indonesian army claims to find the Guzman's body it's badly decomposed and partially eaten by animals it's so gruesome the authorities won't let his family view the remains it was very difficult to believe that they took two or three days I recall to find the body when in fact the pilot that said he did set the GPS recorder so they should have been able to find the spot rumors swirl about do Guzman's death was it suicide murder or yet another perfectly planned deception he wanted to disappear anywhere on this planet Indonesia would be one of the easier places to do it that you could for a few hundred dollars purchase a recently deceased body independent drilling takes place directly beside where did Guzman took thousands of samples and not a single ounce of gold is found they go and they drill their own core samples and the security they have around that is unmatched they are drilling 2 or 3 feet away from where reiax assets have tons of gold all they find is rock flake there is no gold there it looks so good it wouldn't be real I mean it's too good to be real it's an unbelievable revelation they just can't believe that this fabulous deposit in fact never existed investors around the world suddenly realize they'd been had Walsh is just flabbergasted cannot believe that this is happening and it's at that point that the bre-x team in Toronto realizes that they've got nothing to go on that they're that their stock is going to zero because this was a massive fraud shares themselves are only useful as wallpaper David Walsh adamantly denies any knowledge of the fraud he moves to the Bahamas with his wife two years later he dies of a massive heart attack John Felder HOF continues to live in a gorgeous home right next to the Yacht Club and the Cayman Islands where there's no tax and there's also no extradition treaty with Canada for white-collar crimes Michael do Guzman the mastermind behind the greatest mining scam of all time is supposedly laid to rest I compare him to Rumplestiltskin he was able to turn a very small amount of gold into a huge amount he's spun a story into a huge amount of gold no criminal charges have arisen out of the bre-x scandal no one has ever spent a day in jail as a result of it the fraud itself has changed the way the Canadian regulator's look at the mining industry it would be somewhat more difficult to pull off a similar type of scam but it isn't impossible it's probably still could be done again the adage caveat emptor is indeed true buyer beware in spite of class-action lawsuits not one investor has ever been compensated a harsh reality for thousands of ordinary people who invested their life savings and bre-x and were left penniless I actually believe that michael de guzman is alive I don't think that he did follow to that helicopter I believe that he faked his own death and that he's enjoying the money that he scammed bre-x [Music] [Music] [Music] [Music] [Music] [Music]

Channel: TOP BOX TV

Views: 375,884

Keywords: masterminds tv show full episodes, masterminds tv show, masterminds, mastermind fools gold, mastermind tv show, true crime, true crime documentary, true crime series, crime documentary, Bre-X, bre-x gold, bre-x fraud, bre-x michael de guzman, bre-x gold mining scandal of the ‘90s, michael de guzman, criminal masterminds, masterminds documentary

Id: 5i5LvQ2jeXE

Length: 22min 2sec (1322 seconds)

Published: Sun Jan 26 2020