Swiss Bank Copies MF Global Fraud, Averts Disaster

When James Turk, Marc Faber, Eric Sprott and Gerald Celente say get your gold out of the hands of bankers, each one of these men isn’t hyping the gold trade.

Consider Switzerland, a nation which relies on customer trust of its banking system for a substantial portion of its Gross Domestic Product (GDP), and which holds approximately 28 percent of all funds held outside of the jurisdiction of the funds’ origins (The Boston Consulting Group Global Wealth 2009), committing a fraudulent disclosure of a highly sensitive financial product.  That’s what happened to a well-heeled customer of an unnamed Swiss bank charged with storing the customer’s physical gold bullion, according to Egon von Greyerz, founder of Switzerland’s Matterhorn Asset Management.

“We are stressing to investors to take their gold out of the banking system, not only because there are runs on banks that will continue, but the risk of being in the banking system is major,” von Greyerz told King World News.  “So you should take the additional step of not just owning physical gold, but also owning it outside of the banking system.

“We (just) had an example of a client moving a substantial amount (of gold) from a Swiss bank to our vaults, and we found out the bank didn’t have the gold. This was supposed to be allocated gold, but the bank didn’t have it.  We didn’t understand why there was a delay (in our vaults receiving the gold), but eventually we found out why there was a delay (the bank didn’t have the gold).  It’s absolutely amazing, but not surprising.”

Reminiscent of another landmark breach of fiduciary trust in the U.S., regarding one of the Fed’s primary dealers MF Global and Gerald Celente’s gold futures account, the revelation of banking fraud has moved to Switzerland. But fortunately, the Swiss bank in question scrambled to find the gold—and was successful acquiring the bullion for its customer—this time.  Though, in the case of Celente, he still hasn’t been made whole from his missing ‘allocated’ brokerage account held at MF Global.  And the gold he contracted for delivery was credited to JP Morgan’s books, instead.

“Every financial institution is under the same kind of pressure as we see in Europe. If you think your money is safe with any of those big names, you’re making a big mistake,” Forbes Magazine quoted Celente in an interview of Nov. 17, 2011, more than two weeks after MF Global’s Oct. 31 bankruptcy.

“When I say take your money out of the banks and put it under the mattress, this is not advice,” Celente said, reminding listeners of the interview that he is not a registered investment adviser.  “Personally, I buy gold coins from reputable companies. I take my money out of investment funds and I buy gold and silver. You need the three g’s — gold, guns and a get-away plan.”

Celente has stated numerous times that, not only bank cash accounts, but bullion stored within the banking system should be withdrawn and held at fee-for-service storage facilities—such as private bullion storage vaults—or home safes.

Cracks in the physical gold market can be anticipated, according to CFTC testimony from one of the gold market’s leading apologists of JP Morgan’s suspicious derivatives trading, Jeff Christian, founder of commodities consulting firm CPM Group, though Christian’s statements weren’t expressed clearly to the layman.  Note: Jeff Christian once worked for Goldman Sachs, another firm suspected of rampant fraud in the derivatives market for mortgage-back securities.

“The CFTC, when it did its most recent report on silver, used the term that we use, ‘the physical market.’ We use that term, as did the CFTC in that report, to talk about the OTC market — in other words, forwards, OTC options, physical metal, and everything else,” Christian told CFTC Chairman Gary Gensler in a Mar. 25, 2010 testimony, admitting to the Commission that the CFTC weekly reports regarding physical inventories at the COMEX includederivatives.  Emphasis added.

Gold Anti-Trust Action Committee (GATA) Director Adrian Douglas provided one of the most powerful testimonies at the CFTC hearing, when he pointed out the enormous size of paper gold in the market (led by JP Morgan’s derivative desk) and the tacit implication that physical gold allegedly held for unsuspecting clients across the globe may not exist, including gold allegedly stored in Swiss banks in alleged ‘allocated’ accounts.  In other words, there’s approximately one ounce of gold for many times more paper gold, which, if called for delivery, could force another MF Global incident anywhere in the world.

“ . . . if we look at the physical market, the LBMA, it trades 20 million ounces of gold per day on a net basis, which is $22 billion,” Douglas told the CFTC.  “That’s $5.4 trillion per year. That is half the size of the U.S. economy. If you take the gross amount, it is about 1 1/2 times the U.S. economy. That is not trading 100-percent-backed metal; it’s trading on a fractional-reserve basis.”

And, on Monday, CFTC Chairman Gary Gensler has opened another investigation into JP Morgan’s derivatives trading losses from activities its CEO Jamie Dimon initially said where executed as hedges, according to Dow Jones Newswire.  However, Bloomberg has confirmed that Dimon has since retracted his statement regarding the type of trading activities that resulted in a substantial loss.

“Commodity Futures Trading Commission Chairman Gary Gensler said the agency had opened an investigation into JP Morgan Chase’s trades, which have resulted in a more than $2 billion in losses so far, but declined to comment on the specifics of the probe,” stated Dow Jones Newswires.

The full extent of the losses and ramifications of the red ink at America’s largest Fed primary dealer to the global banking system are not yet known.  Speculation of banks calling in gold to sell it into the marketplace to remain liquid run rampant.   von Greyerz’s statement to King World News only serves to escalate nervousness among investors to run to physical bullion in the gold market.