In troubled economic times, some people are putting their money into gold. But a Diamond District business owner was shocked to find that the solid gold bars he bought for $100,000 turned out to not be gold at all, and now the Secret Service is looking into just how many of the fake bars may be on the market. NY1's Vivian Lee filed the following exclusive report.
Chemical engineer Ibrahim Fadl, who owns a business in Manhattan's Diamond District, strips away the outer layer of a 10-ounce bar of what he thought was pure gold, sold to him by a customer at his gold refinery business.
The shell peels off like foil on a chocolate bar.
"It's got to be somebody really, really professional," said Fadl. "When I analyzed them, it showed they are tungsten."
Tungsten is a metal used to make military weaponry, drilling equipment and even jewelry. Gold and tungsten have almost the exact same density, so a substitution of metals would be difficult to detect.
Fadl bought four of the bars, exchanging them for smaller gold bars, because the customer would not take cash.
Asked how he felt, Fadl said, "Sick to my stomach, but I thank god we didn't sell this to somebody."
Fadl said a colleague tipped him off about the scam, prompting him to drill holes in the bars and test the contents.
While NY1 cameras rolled, agents with the counterfeit unit of the Secret Service arrived to follow up on Fadl's report about the fake bars.
"People are selling their homes to buy gold, it's a big issue," said Fadl.
The businessman and Manhattan gold dealer Raymond Nessim contacted the company, whose stamp on the bars looks legit.
Nessim said officials with the Swiss brand were horrified and had not heard of the scam.
"Buyers should be aware they should not buy gold bars from any private individual whom they don't know," said Nessim.
Fadl said he has bought real gold from the same customer before, and now he cannot get hold of him.
He also has no way of knowing how many others fell for this apparent modern-day "fool's gold."
"I can't imagine how they cut the bar clean, and cut, and took everything inside out and left the shell to fit the tungsten in," said Fadl.
It leaves Fadl feeling hollow, and had.
Law enforcement sources told NY1 that the investigation is in its preliminary stages and officials cannot say how prevalent the problem may be, but a federal agency is looking into the complaint.