|Vol. 36, No. 3
Federico Barlocher on Internet Gem Scams
by Robert Genis
I know this sounds hard to believe but when we first got on the internet in 1995, you could not sell anything on-line. The main ethos was that we were building a new society, where the sharing of information was free and worldwide. Seems quaint now.
At that time, our website was 100% informational, with the main goal of educating people on how to buy and collect gems. There were no gems for sale on the site. One part of the education was to protect people from buying gems from Canadian boiler room scams.
During that time, the primary gem newsletter with a precious gems matrix was the Marcum Report. It reported what investors/collectors were paying for AGL graded 3.5/75 rubies, sapphires and emeralds. Eventually the scamsters took note and created their own fraudulent labs with grades that looked the same as AGL reports with the intention of ripping off buyers. Every stone they sold was promoted as 3.5/75, when in reality the stones were 9.5/90's. This meant that investors paid top dollar for what they thought were the best Ceylon sapphires, but in reality received $10 per carat blue/black Australian sapphires.
Due to the internet and availability of such information, the Canadian boiler rooms faded. As we all know, the internet eventually became one large worldwide commercial venture. Now the entire world is on the internet, including scores of new scammers.
We decided to discuss internet scams with Federico Barlocher, the administrator of the Facebook page Scamologist. This specialized group has over 21,000 members.
GF: Why did you start Scamologist?
FB: I started Scamologist with the simple idea of sharing information for the benefit of everybody. I believe the internet needs a true and practical gem and mineral educational knowledge site. Plus, if possible, to help people not fall into the traps of the scammers around the web and in real life.
GF: Does any part of the world seem to have the most scammers?
FB: Scammers are spread throughout the world, because it's the bad part of human nature. As a general rule, scammers from less developed countries are more emotional. They use a lot of fantasy, are very clever, but they use less sophisticated tricks. The developed world is very well represented with scams too. However, they are less visible for the simple reason that people have a higher level of education and the scams are more sophisticated. Often they take more time to understand and realize. Most of the mining areas for colored gems are in less developed countries. It's easy to find many different types of scams created with a lot of fantasy there. From my experience of traveling for 40 years to all the remote mining places probably on the top of the list for possible scams are countries like Nigeria, Sierra Leone, Congo, Pakistan, Afghanistan, Vietnam, Indonesia, China, Brazil, Colombia and many others.
GF: What is the most common scam?
FB: The most basic gem or mineral scam seen on Scamologist is the classic one done on the internet: they ask for money in advance and simply never send the goods. Most of the times the gem and mineral photos used in the scam have been stolen from legitimate sellers.
GF: What is the most interesting scam you have seen on your Facebook page?
FB: The most interesting gem scams have been done by some Southeast Asia gem labs to increase their own customers and by consequence their income (Ed. See next article- Burma dealers sell heated African rubies fraudulently pawned as natural, authenticated by complicit gem lab). The trick is quite simple but very effective. These labs offer their dealer customers gem reports with inflated grading of the gem tested, reporting better characteristics than the gem actually possesses (Ed. For example, rubies not from Burma are called Burmese, stones that are treated are called not treated, or terms like "pigeon blood", or vivid red are misused, etc). With these "friendly" reports in their hands, the dealers can sell the gem at a much higher price than the real value of the stone. To attract customers (mostly dealers), the labs offer packages of hundreds of reports paid by the customers in advance, in order to be more connected to the lab. At this point, when the lab customer becomes a regular customer, the lab helps them with these very "friendly" gem reports. For the other (not regular) customers of the lab, the reports will be normal or even sometimes worse than the actual gem. In doing so, these labs become responsible for fraud valuing in excess of hundreds of millions of dollars, which is damaging the reputation of the entire gem industry. It is a relatively simple scam that very effectively allows a fraudulent lab and dealer to defraud buyers, and both the lab and the dealer make more money as a result.
GF: Do you have any words of wisdom for private collectors on how not to get scammed?
FB: With regard to buying on the internet, I would say that if we want have fun and spend a few hundred of dollars, there is no problem because the financial risk is limited. However, in cases where the item is of higher value, it is better to see the gem directly with our own eyes before we pay the money or, if that is not possible, to have some mechanism for being certain we can trust the dealer from whom we are buying.
Gemstone Forecaster's Conclusions
We still believe the way to buy expensive gemstones on-line is to trust your dealer. As a clue, you can use the wayback machine to see how long a web site has been in business: https://archive.org/web/ . Naturally the longer the better.
It's more difficult to buy gems on a Facebook business page. Anyone can simply start a fake page, scam someone, disappear, change their fake name, and do it all over again. On the other hand, if someone has a legitimate website, and a buyer is scammed, that information is easy to find in a google search, and the operation collapses quickly.
Interestingly, even we have been approached by scammers trying to trick us into "buying". In one example, we were emailed photos of large high value gems that looked interesting at first glance. But when we requested more photos or video, the scamster had a hard time providing them. And when we asked for the gem to be submitted to AGL for grading, there was no response.
To be safe, make the dealer send the gems to a well respected independent third party lab chosen by you. Offer to pay for this service. Once the stone is confirmed to be as advertised, have the lab ship the material directly to you. By using this simple strategy, most scams will be avoided.
Remember, if it sounds too good to be true, it probably is. Reagan's old maxim, "Trust but verify" also works in the gem business. Never forget all gem labs are not equal. Caveat Emptor.
Burma dealers sell heated African rubies fraudulently pawned as natural, authenticated by complicit gem lab
By Sam Cooley
Excited by the prospect of a sale, a middle aged female Burmese ruby dealer excitedly opens the folds of a palm-sized yellow parcel paper. The stones are supposed to be from Myanmar, but sadly, they're of inferior quality and from a completely different continent.
Inside the packet of more than thirty carats is an assemblage of round and oval-cut, beautiful, perfect, natural and unheated "pigeon blood" rubies from Mong Hsu, Shan State, Myanmar. When she pours the rubies on to the black velvet, the stones glitter underneath the florescent lights above.
Mong Hsu is a locality in Myanmar well known for producing spectacular, red rubies which are often heated or treated. However, contrary to popular belief, unheated blood red rubies from this region do indeed exist. And on this day in late July, the dealer-owner of Pyit Tine Thaung Gems in Bogyoke Market-was quick to claim the parcel authentic.
"Deeha dtibawa Maing Shu pattamya " she proudly claims. [These are natural rubies from Mong Shu.]
"Ba law jai day?" [How much do you want to pay?]
Translated to English the stones on offer were advertised as unheated, untreated, therefore commanding a healthy premium in comparison to rubies heated and or enhanced with glass.
But integrity and honesty in the gem world is perhaps even rarer than the most beautiful rubies on Earth. For every so-called 'pigeon blood' Burmese ruby is a legion of fakers, con-men, and people who themselves have been duped into purchasing gems on false pretenses, only to dump the scam on to other unsuspecting or willfully blind wholesalers, retailers, and customers of course.
If only business people could be trusted to shoulder the risk of faulty merchandise instead of resorting to fraud to make a dollar.
But perhaps the most dangerous charlatans involved in the deceitful sale of "unheated heated" rubies are complicit laboratories who would prefer to overlook whether a stone has been heated or not, mostly out of expediency.
The issue of natural-versus-heated rubies of Myanmar origin is sadly a subject of unpalatable interpretation within the country, and indeed the whole world over, as most gemologists are too inexperienced with Burmese rubies to detect subtle heat signatures.
Depending on the personal ethics and honesty of Myanmar gemologists and dealers involved in the trade, a stone landing in between the category of "heated" versus "unheated" can be certified as natural, even though it's been cooked to enhance clarity and color.
After months perusing licensed ruby merchants and their questionable wares in Yangon, Naypidaw, Mandalay and Monywa Myanmar, parcels of African heated rubies are in fact being sold to customers and then authenticated as natural and from Burma by at least one complicit and popular gemological lab in Yangon, the Asia Glory Gemological Laboratory, (AGGL).
AGGL is a popular choice among many Yangon and Mogok based dealers, and for good reason. Not only are the staff familiar with stones from Myanmar's famous gem tracts: Mogok, Hpakant, Namya, and Mong Shu; staff gemologists also know when it's time to turn a blind eye so unholy and fraudulent deals continue unabated.
This was evidenced by a recent visit to AGGL whilst in possession of a 10.11 carat parcel of small, well-cut natural "Ko Tway" rubies allegedly from Mong Hsu. In reality, they were African and heated.
"Only two or three rubies (of a packet of 31 .36-.40 carat stones) are for sure heated. The rest...have been warmed, so they're natural," says U Kyaw Zwar Htun, top gemologist of AGGL in Yangon.
"Where are you taking these stones? Other laboratories (outside Myanmar) all will say natural certification."
A deafening silence fills the air of Htun's laboratory in Junction City, a large mall opposite to the famed Bogyoke Aung San gem market of downtown Yangon.
"Other labs will say it's natural," he says, only to be met with more silence. "Are you happy?"
By Htun's logic, the level of heating undergone by such rubies purchased at Pyit Tine Thaung Gems (#52 in Navarat Hall in Bogyoke Aung San Market in Yangon) is not detectable in labs in other countries. Therefore the stones can freely pass as unheated, successfully scamming the whole world over.
But not all Myanmar gemologists bend to the whims of the market. The same parcel of 31 dubious "natural, unheated" Mong Hsu rubies sold by Pyit Tine Thaung Gems was discovered to be in fact visibly heated and likely of an origin outside Myanmar according to other gemologists in Yangon.
Gem Fraud doesn't always go undetected.
"This is just my opinion, but these stones are not from our country. I think, though I do not have the equipment here to prove it, that these stones are from Africa, possibly Madagascar or Mozambique, but not Myanmar" says Kyaw Wanna, an FGA gemologist who tested the same stones.
"These are not from our country"
Wunna isn't alone. A third laboratory, The Gemological Institute of Myanmar, also concurred with Wunna, even going as far to state all the stones had visible signs of being heated.
"Which lab should we believe?" were the words of a desperate broker confronted with the lab results. She was coerced to promptly return the money lest state actors get involved.
In a bizarre last-ditch effort to avoid forking over the money, a broker and shop owner near Kabar Aye Pagoda in Yangon associated with Pyit Tine Thaung Gems even went as far as to suggest the stones had been swapped.
This circumstance encountered by the author is a mere anecdote underpinning a central issue encountered by dealers of genuine unheated rubies.
The truth is: legions of savvy gem burners position themselves close to source locations and use manifold tricks to slowly and gently roast rubies at a temperature low enough to escape detection by most labs and dealers. All it takes, though, is a sharp and honest gemologist to trace the origin and discover evidence of tampering. And the jig is up if a dealer wishes to stand by their products.
Such dishonorable and disgraceful schemes diminish the reputation and face of honest Myanmar stone dealers across the country. Perhaps one day the primary perpetrator of these undisclosed practices will be brought to justice or, at the least, revealed for their treachery and the damage inflicted on Myanmar's God-given and blessed mineral and gem deposits.
International Gem Reports
Myanmar's 'Valley of the Rubies' emerges from shadows
Secretive mining town celebrates 800th anniversary as it reaches out to tourists
April 08, 2018
When the world hears about Mogok, it usually concerns some hefty ruby unearthed in the region and auctioned for millions of dollars -- the kind of discovery that has dominated news about the remote gem-mining town for decades. But with gnawing anxieties over dwindling gem deposits, locals are turning to a promising new source of revenue.
Tourism presents the best opportunity for many in the "Valley of the Rubies," as the town is known. Visitors can explore its bustling gem markets, pagoda-clad hilltops, surrounding ethnic villages and some open mines, as well as sample the regionally praised Shan and Chinese fare.
But there is an irksome legal hurdle to local officials' dreams of launching Mogok as a new, untapped destination in Myanmar. Surrounded by mountains and some 200km northeast of Mandalay, Mogok was off-limits to foreign visitors for most of the five decades up to 2013, when the military-backed government eased restrictions but decreed that visitors must have permits.
Amid an unprecedented celebration of its culture and history on March 29-31, there were calls to shed that policy and truly open the enigmatic gemstone hub to the world.
Mandalay Region Chief Minister Zaw Myint Maung promised the crowd at the opening ceremony he would push "the office above" to drop the visitor restrictions, according to local reports.
Phyu Phyu Myint, director of the Mogok Htar Pwe Gems Traders and Brokers Association, says Mogok has everything it needs to attract tourists. "We don't really need specific improvements since Mogok is beautiful, with temples, pagodas, religions and gems," she said. If the government eased visitor restrictions, it would be good "not only for us, but also for the country to get more income from tourism," she added.
Over a year ago the anniversary organizers began trawling through the area's history in search of a hook for the festivities. They settled on the 800th anniversary, based on the story of three Shan hunters who were ordered by their king to establish a settlement in the valley after discovering a ruby there.
One of the organizers, Khin Khin Kyaw, the founder of advertising company Sail, said Mogok has strong historic and religious attractions. It offered "beautiful land" for hiking, and fledgling high-end accommodation, including the King Bridge Resort and the Golden Butterfly Hotel.
"Business is not good for local people presently, so with this event we want to promote the local land for global destination tourism, like Inle [Lake] and [the ancient city of] Bagan," she said.
"There are not many gems left, everything is mined maybe," she added, stressing the importance of creating a new industry because "kids here are drunk, they have nothing to do."
"We have to think about their future, how they survive and flourish. The only thing right now we can think of is local and foreign tourism and for that we want the government to give foreigners access."
Authorities cite safety and security reasons for visitor restrictions, as armed ethnic groups and bandits operate near the border with Shan State. If granted, a permit takes between two and three weeks to receive, and must be shown at two army checkpoints on the route from Mandalay and at the city's tourism police office.
Locals say, however, the guards are in place to prevent foreigners buying gems directly and thereby avoiding tax. For centuries the quality gemstones lodged in the white marbles of the Mogok Stone Tract -- particularly the pigeon-blood ruby and the blue sapphire -- have lured outsiders to the temperate valley in the hope of securing a discount price.
Other stones, such as spinel, painite, peridot, topaz and zircon, are also found in the hills and regularly turn up in Mogok's morning and afternoon markets.
Control of Mogok and its gems has been coveted by warlords and leaders throughout history. The Toungoo Empire took it from a Shan king in the 16th century, and the British established Burma Ruby Mines Ltd. in 1889, three years after their empire officially colonized Burma.
A reminder of the British occupation is in Ywar Thar Yar town, 15km from Mogok. Also known as Bernardmyo or Bernard Town after the Chief Commissioner of Upper Burma Edward Bernard, the former army garrison still has a cemetery of British soldiers buried in the 1880s and 1890s.
In 1969 the ruling Burma Socialist Programme Party nationalized the mines, pushing locals into small-scale trading of cheap stones, according to Khin Khin Kyaw. As well as dwindling deposits, those in the local mine industry now face delays in receiving mining concession permits, and a boycott of Myanmar gems by several luxury brands, such as Cartier, in protest at the violence against the Rohingya people in Rakhine State.
Over the past decade human rights groups have also reported poor working conditions, child labor and forced labor in Mogok's mines, some of which are military-owned. The focus has been mainly on the jade mines north of Mogok in Kachin State's Hpakant, where the scale of deaths in poorly regulated mines, drug addiction among workers, and military exploitation of local resources is much larger.
None of these problems, though, registered on the faces of locals during the 800th anniversary festivities. Ethnic Lisu, Pa-laung and Shan came in traditional dress from surrounding villages to watch singers, comedians and traditional dancers performing on a stage next to Mogok Lake, an abandoned mining pit of Burma Ruby Mines that was flooded in 1929.
Monasteries opened their doors to help Mogok's hotels cope with the visitors, while noodle shop owners stayed open until midnight, offering customers steamed buns made especially for the occasion.
Around mid-morning on the three days of the celebration, some 3,000 monks circled Mogok Lake, collecting donations. On the banks of the brown river hustlers sold python skins and so-called sacred figurines. Teashops overflowed, cars continuously honked, and local Sikhs handed free bags of noodles to the Nepalese Ghurkhas, Burmese, Chinese, Indian and other residents of the city.
In the evenings people picked at candyfloss and sweet sticky rice next to a newly unveiled statue of independence hero General Aung San and gawped at fireworks illuminating the contours of mountains.
But for many miners the celebrations were spent sifting through gravel, searching for a life-changing gemstone. In 2015 a Mogok gem dubbed the Sunrise Ruby and weighing 25.59 carats became the most expensive ever ruby ever sold when it went for $30 million at a Swiss auction.
Mogok-born Aung Kyaw Zin runs SP Gems, a company with five major ruby mines and 200 permanent workers. It comes under the same umbrella as his parent's company, popular Myanmar pastry group SP Bakery.
He said most of his mines are waiting to renew their permits. "The parliament is trying to fix a new law for gems," he said. "The government wants to set the bar to offer opportunity for all the people."
Most mines focusing on secondary deposits, found in soft rock and sediment, are "finished," he said, which is why "people are looking for the primary source" in hard rocks. "The supply of natural resources has a limitation. The more and more you dig, the deeper the mine goes and the more difficult it gets. This is one of the facts; the supply is getting less," he said.
Outside the mouth of Daw Taw, a primary mine run by the Ruby Dragon Group conglomerate, miner Han Wai Soe held a water bottle labeled with the 800th anniversary logo. Near him a digger loaded gravel onto a large conveyor belt hosed down by two workers searching for gems.
"What we can do right now is wash the soil out but not touch the rock," he said, adding that the mine is waiting to renew its permit. "We took out 200 tons of soil and out of that we got 2,000 carats of ruby."
For 18 months, his team has tunneled 250 meters horizontally into the mountainside and plans to go another 150 meters, but there have been few major gem finds. "800 years is a long time," he said. "The mines are running low."
But interest in visiting the town is running high -- and has been for years. Many believe the 800th anniversary is a signal that finally Mogok is ready to share its unique heritage with the world.
Myanmar's Jade-Fueled War
Are the Tatmadaw and KIA colluding to maximize jade profits?
By Daniel Combs
June 01, 2018
In 2015, Naw Aung, a 30-year-old miner from Mogaung Township, watched as the hillside he and his friends were working on started to collapse. An explosion at a nearby jade mine had set the earth shaking, and as stones rained down on the miners, Naw Aung rushed to escape. When the land stopped moving, 14 people were dead, including four of his friends. As Naw Aung tried to dig his companions out of the rubble, other miners ran past him to pick through the stones that had been dislodged by the violence.
"No one helps you when you're a poor jade miner," he said. "Everyone has to fend for themselves. The only people that get any help are those that can pay for it. The rich men, they get all the help they want."
The remote mountains of Kachin state, in Myanmar's far north, hold the world's only steady supply of high quality jadeite. The green stone fetches enormous prices on the Chinese market, where it can outprice any gemstone save for colored diamonds. The vast majority of Myanmar's jade trade is unrecorded and underground, which makes effective governance of the industry very difficult. Independent estimates of the trade's value vary widely. It is worth somewhere between $8 billion and $40 billion annually. At the low end, this would be more than the yearly budget of Myanmar's military; at the higher end of the scale, it would account for over half the country's GDP.
The vast majority of that money goes through secretive and opaque channels controlled by well-connected business elites. Jade's arbitrary pricing and the fact that much of the trade takes place in a remote, largely ungoverned area make the stone an excellent vehicle for illicit trade and money laundering. Myanmar's national armed forces, known locally as the Tatmadaw, control most of its flow, while the majority of financing comes from Chinese investors and their affiliates inside Myanmar.
The Kachin Independence Army, or KIA, a rebel group that is engaged in a civil war against the Myanmar government over their right to self-govern, also exerts authority over a sizable portion of the jade stream. Smuggling routes into China traverse KIA territory, where the army can tax traffickers. Some groups allege that both the KIA and the Tatmadaw use their off-the-books jade money to finance the fighting in Kachin state.
Colombia's emerald industry continues to be tied to violence and organized crime
by Stephen Gill
June 6, 2018
Colombia's emerald industry has had trouble cutting links with organized crime and violence.
Decades after the "green wars" over control of the mines in eastern Colombia, the United States said Tuesday it had added eight businesses associated with emerald kingpin Pedro Rincon to its "kingpin list."
Rincon, also known as "Pedro Orejas," six of his brothers and his brother-in-law were put on what is essentially a blacklist of suspected drug traffickers prohibited from doing business with the US, amid investigations regarding alleged involvement in drug trafficking and money laundering.
The action against the Rincon family attempts to "shut off the flow of Colombian cocaine proceeds through the Rincon Castillo drug trafficking organization's elaborate network of emerald mines and other seemingly legitimate enterprises," according to the entity.
Rincon, who is currently serving a sentence in Picaleña prison in the central Colombian city of Ibague for trafficking, manufacturing and possession of illegal firearms also faces extradition to the US to answer before a Florida court.
Emerald magnate captured over alleged arms ties to paramilitaries
The restriction imposed by the Office of Foreign Assets Control of the United States (OFAC) places a blockade on companies' transactions and will greatly dilute their influence in the emerald industry.
As a result of today's action, any assets in which these persons have an interest in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC's regulations generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons.
The Clinton List is the colloquial term for the US Treasury Department's Specially Designated Nationals List (SDN), compiled by the OFAC and has targeted Colombian individuals, businesses and even football clubs for decades in an attempt to combat drug trafficking and money laundering.
"The United States is committed to fighting cartels engaged in cocaine trafficking and the violent networks they have cultivated to wash dirty money and transport these dangerous drugs," read the OFAC statement.
Emeralds and cocaine
Pedro Orejas became one of the leading figures in the Colombian emerald trade in April 2013 when controversial "emerald czar" Victor Carranza died at age 78.
Orejas who is described as "an associate" of Horacio de Jesus Triana, another powerful figure in the emerald industry has been as the center of controversy in central Colombia as powerful families and illegal armed groups vie for control of the lucrative sector.
According to the US Treasury Department, "since at least 2002, Colombian narcotics trafficker Pedro Rincon Castillo regularly distributed cocaine shipments, including in multi-ton quantities, from Colombia to Venezuela, Mexico, the Dominican Republic, Haiti, and elsewhere, with the intention to import into the United States."
He was arrested in 2013 and sentenced to 20 years, however he "continued to commit crimes in money laundering and drug trafficking," according to the statement.
The department also pointed out that his "organization operated with laboratories in Boyaca and, apparently, have ties with Clan Usuga and the Sinaloa Cartel."
A history of crime and violence in the emerald industry
According to analysis site Insight Crime, the first emerald mines in Colombia were legalized by the government in 1953. But the miners were left to resolve their disputes on their own, which they usually did with guns.
The "Green War" broke out in the 1960s, as emerald magnates used paramilitaries to defend their turf from guerrillas and drug traffickers chasing the industry's big profits and money laundering potential.
In 1985, major Colombia drug cartels became embroiled in the conflict, attempting to take control of the emerald mines.
According to government sources, about 3,500 people were killed in fighting across Colombia between 1984 and 1990. The fighting ended in the early 1990s when the late Carranza forged an uneasy peace, with the help of now-Bishop Pabon, between conflicting interests.
While the violence has not reached the same levels, the emerald industry continues to be plagued with links to organized crime organizations.
This 3.24 Burma ruby sold for $131,250 - or over $40,000 per carat in April.