$134.5 BILLION worth of US bonds seized from smugglers at Swiss border

Two Japanese smugglers were busted on the Italian-Swiss border with a suitcase whose false bottom was stuffed with $134.5 billion in US treasury bonds, including two one billion dollar Kennedy bonds (a denomination used for national currency reserves). Either these guys are the world's dumbest, most ambitious counterfeiters, or they're the biggest currency smugglers ever caught.

It gets better: Italian law says that the penalty for currency smuggling is 40% of the seized cash, and that 40% (US$28 billion) will take a huge bite out of Italy's public debt.

If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy's eliminate its public deficit.

If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.

As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police.

Some important international financial newspapers had already reported on the existence of 'funny money' circulating on parallel, i.e. unofficial, financial markets.

US government securities seized from Japanese nationals, not clear whether real or fake (via @stacyhebert)


  1. It is astounding that they don’t instantly know whether or not $134.5 BILLION in bonds is real or fake. Either way, seems a bit greedy. They should have stopped at $134.4 billion.

  2. if Italy is that in need of cash, why not legalize pot and become the boutique cannabis exporter? They shouldn’t be getting any American pressure about that any more.

  3. This blog speculates about possible connections to the resignation of the Japanese Minister of the Interior and the fact that the amount of the bonds is exactly the total of remaining TARP funds.

  4. According to this article on Bloomberg.com the bonds are fake :


    “The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said. Moreover, the “Kennedy” classification of the bonds doesn’t appear to exist, he said.”

  5. Reminds me of the plot of Gibson’s “Spook Country”…we will probably never find out the real story, behind this…

  6. Quick question – how would issuing a 28$b fine solve any sort of debts or woes? Who would actually be paying that amount?

  7. if the bonds are fake, is it OK for the smugglers to use mannequins to serve their sentences?

  8. Were they real, the $38B would disappear into the pockets of the Mafia pretty quickly, and Italy’s public finances would be left more or less where they were.

  9. or they’re the biggest currency smugglers ever caught.

    What precisely is currency smuggling?

    Has cash been outlawed while I was asleep last night?

    c.f. Wired 4.08 (August 1996) “The Internet as Buttonwood Tree” by Robert A. Hettinga

    The original building blocks of modern finance were bearer securities, printed on paper certificates centuries ago and traded at specific places like the old buttonwood tree on Wall Street in New York. Possession was 100 percent of the law with bearer certificates. Show a certificate, and, as its bearer, you were entitled to whatever the certificate said you could have: debt payments (if a bond), equity voting (if a stock), or some contingent claim (if a derivative like an option or a futures contract).

    We used bearer certificates in this country until they were abolished in the early 1980s. The slow decline of bearer certificates occurred first of all because book-entry settlement technology was invented. In book-entry settlement, one certificate signifying an entire stock or bond issue is locked up in a stock exchange’s clearinghouse, and securities are “traded” by offsetting accounting entries at the buyer, seller, and a clearinghouse. This gained popularity as certificates became cheaper to handle when stored in a vault somewhere, and the introduction of computers made the scheme practical.

    Secondly, the IRS found out how easy it is to subpoena records in this automated environment. The result was transaction taxes of all kinds: everything from sales and income to capital gains. To make transaction taxes work, you need audit trails, which book-entry settlement has in spades. You also need strong biometric identity: signatures, pictures, and fingerprints. Now you can send miscreants to jail if they change the wrong number somewhere. This is why, despite their kvetching about taxes and regulations, the securities markets let Uncle Sam do what he wants. If Uncle gets his cut, the finance community doesn’t have to spend so much money enforcing its agreements in the market.

  10. IIRC, all bonds issued by the U.S. government (and most other developed countries, for that matter) have been “registered” for decades.

    Registered bonds are owned by the person listed as the owner in the central registry. They effectively cannot be stolen, since the certificate does not convey title (it looks nice in a safety deposit box, however). If the certificate is lost, it can be reissued.

    Bearer bonds, in contrast, belong to whomever holds the physical certificate, and can be stolen. Bearer bonds have largely fallen into disuse for a variety of reasons (including the fact that they can be lost or stolen); however, before modern communications systems, registered bonds would have been impractical to buy and sell.

    Therefore, if these bonds are real, this “smuggling” and/or “theft” is irrelevant since the title to the bonds does not travel with the piece of paper. If they are fake, then it is a pretty lousy fake since anyone with basic knowledge of how the system works would know that they couldn’t possibly be real.

  11. No doubt these are the bonds Hans Gruber was trying to steal from Nakatomi Plaza.

    Hmm, I’d bet dollars to doughnuts the folks caught were either running a scam or victims of a scam. There are plenty of scams involving the promise of large quantities of money which need never be actually cashed to knowledgeable authorities. A pigeon drop and advance-fee scam are two examples. They key to these scams is convincing the mark such a quantity of money exists, a prospect for which fake documents could be readily useful.

  12. I might note that it’s not unlikely that North Korea is written all over these bonds, as they’re typically behind things of this nature. Additionally, it also wouldn’t be unlikely that the “Japanese nationals” are Koreans with fake passports.

    Certainly with the supposed quality of these fakes, we’re likely looking at either super high-quality fakes (North Korea), or some corruption at unbelievably high levels (Federal Reserve? After all, who the money is going to is a “state secret” even from Congress).

  13. From The Saga Of The Bearer Bonds:

    Ok, who has $130 billion in bearer bonds? Remember, bearer instruments haven’t been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 – a time of high deficits) The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere – to anyone.

    Are we willing to assume that all the “issue” of Treasury bonds has been done “above board” as required by law. If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn’t want reported over the last, oh, say 10 or 20 years, then the following is about to occur: [shitstorm]

  14. @Zuzu “What precisely is currency smuggling?”

    Pretty much all countries restrict how much cash you’re allowed to take across their borders, especially on the way out. Above a certain threshold, you should expect to be taxed (certainly by the country you’re leaving; possibly by the one you’re entering) and expect to be asked some pretty intense questions about why you’re carrying so much cash around in the first place.

    From vague memories of the customs signs in airports, I think the UK’s limit is around £10,000; I’d expect the EU (and therefore the Italian/Swiss border) to be about the same. A quick google search suggests that the limit for carrying cash out of the USA without incurring taxes is $10,000.

    This has been a bit of a problem for a couple of my friends who were moving their lives — and therefore life savings — between countries. Sending the money between banks incurs taxes and bank charges. In the end I think they just made two trips with bags stuffed full of cash, keeping each trip just under the tax threshold.

  15. If these are real, then the US Reserve should be shitting themselves right now. How does that much in bonds get out there? And if they are cashed in, that’s gotta crash the country’s economy.

  16. IF they are real, they represent an amount around 25% of the Japanese government’s US Treasury holdings. Or nearly all of Russia’s. No other country holds that much in US Treasuries except China.

    If they are fake, how in the world would the forgers think they could get away with this? Why such large denomination, which are normally used only between governments? Why, if they can make such quality forgeries, not make them in more common amounts like $1 million, which would arouse far less suspicion.

    My bet is on them being real and either issued by the USA surreptitiously or else they were owned by Japan, who might well be wise to divest themselves of some long term US debt… even losing 40% of their value, they might yet end up coming out ahead.

  17. What’s to stop the US Reserve declaring that the bonds are fake even if they were issued by them? Is there a third party that can check the validity of those bonds?

  18. From vague memories of the customs signs in airports, I think the UK’s limit is around £10,000; I’d expect the EU (and therefore the Italian/Swiss border) to be about the same. A quick google search suggests that the limit for carrying cash out of the USA without incurring taxes is $10,000.

    Which is an ever-diminishing value, considering inflationary monetary policies of “modern” economies. The same way that inflation creeps people up into higher income tax brackets.

    (How soon until traveling with more than $10,000 USD would be normal for travel and expenses for a Rick Steves tour of Europe?)

    If these are real, then the US Reserve should be shitting themselves right now.

    The Federal Reserve should be shitting itself if H.R. 1207: Federal Reserve Transparency Act of 2009 is passed into law.

  19. What’s to stop the US Reserve declaring that the bonds are fake even if they were issued by them? Is there a third party that can check the validity of those bonds?

    Does the serialization of bearer bonds provide a non-repudiation mechanism?

  20. @9 simple. They already have the bonds – they just take their 40% cut before they return them to their owners.

  21. If this is an attempt to cash in US dollar-based instruments to avoid hyperinflation, won’t it trigger…hyperinflation?

  22. Shouldn’t 40% of $135B USD be $54B? Not that it will matter much if they’re counterfeit…

  23. They may have been trying to get the money to Nigeria… in order to collect on the ONE TRILLION DOLLARS they won in a national lottery there.

  24. #17 Masamunecyrus has it cracked. This has North Korea’s watery kimchee fingerprints all over it. If those two turn out to be real Japanese nationals I’ll eat my dog. Not that a Japanese national is incapable of that kind of crime, but NK LOVES to use Jse passports for all kinds of monkey business.

  25. With the new treaties against tax havens, if the bonds are real, the corporation(s) of origin and the banks they were heading for may suffer some serious sanctions. This could also cause EU trade sanctions against Switzerland if it’s real and they knew.

  26. I think nestor.silk is right. Somebody from the Phillipines read *The Cryptonomicon* and went all Galaxy Quest.

  27. @#20 BUGS

    The U.S. does not tax currency brought in or out. US Customs & Border Protection requires that the amount be reported on form FinCEN 105.

  28. I think nestor.silk is right. Somebody from the Phillipines read *The Cryptonomicon*

    You you referring to the physical logistics in terms of volume, weight, and time constraints Avi lays out in terms of smuggling in $100 notes and smuggling out the gold?

    I know that’s what I thought of in juxtaposing $100 USD notes with bearer bond certificates. (Which is why Tim May and Robert Hettinga have a point about digital bearer bonds as electronic money. The equivalent to billions of euros in value could be hidden in the firmware of an iPod, or a million other forms of consumer electronics and storage mediums.)

  29. I want to know on whose behalf this smuggling was for. Won’t surprise me if it’s some corrupted Third World leader.

    Anyway, look for a new Italian restaurant in Tokyo suburb in, say, fifteen years time when these two guys get out of jail.

  30. And just think, as recently as 1997 you needed to hold the world hostage with a subterranean nuclear device to get a briefcase with $100 billion in it. Also, Mike Meyers still seemed genuinely entertaining. Good times, good times.

  31. @23 I assume that other countries are quite capable to test these bonds and if they look genuine, will ask for extraordinary proof that they aren’t.

    Because if it look like the U.S. is blatantly welshing when it concerns her debt, it’ll get very very ugly.


    Being Welsh I take exception of your use of the racist term ‘welshing’, please refrain from its use.

  33. #31 very funny ! On a more serious note …In poor countries a basic meal is 20 cents and so
    you could feed the world for about a month with that.

  34. Well maybe the money belongs to them, maybe they received it after giving their bank account details to an african prince.

  35. Maybe the ultimate payoff from a Nigerian 419 scam that goes a little bit further than most?

    Points against counterfeiting:
    1) How many people have seen a $500M or $1B bond?
    2)How do you convincingly counterfeit something you’ve never seen?
    3) How do you exchange a counterfeit bond in such a high denomination?

    Points against genuine:
    1) Provenance. They have to have belonged to s sovereign government, and governments don’t usually have motivation for smuggling something like this.
    2) Did the US even make bearer bonds in these denominations?

    Side issues:
    -$134 billion is a little over 1% of total US government debt ($11 Trillion+). Debatable whether this would collapse our economy on the open market, since it’s about the equivalent of 6 weeks worth of new treasury auctions.

    -Stolen and unreported? A secretive government might have had such bonds stolen and not announced it.

    -A country trying to start selling their US debt without collapsing the market? This would be the scariest for a US person.

  36. So wait, North Korea is currently preparing for a change of power, Kim Jong Il supposedly is already dead and his son Kim Jong Un – whose whereabouts nobody knows and who supposedly used to go to Schools in Switzerland, in Berne Köniz ten years ago – will take over the power. Could it be that his son still lives in Switzerland and that this money was meant as some transition money for the power change? I hope for Kim Jong Un that he’s not as big a douche as his father.

  37. Just last week I was watching a youtube of a 1990 Robert Anton Wilson reading in California in which he (in the course of describing the Vatican bank scandal of that day) reports that counterfeits are constantly circulating in the markets – that they don’t often get caught so long as they’re good enough to pass cursory inspection before they move along to the next bank.

  38. Seems everybody’s doing it.

    Spanish police recently intercepted a fine selection of suitcases in Barcelona and Marbella containing false US bonds, coins notes and microfilms (?) to the value of $16.5 billion and one, allegedly with $1.5 trillion, stuffed with bits of blue cardboard.

    “The bonds were supposedly issued by the US Federal Reserve in 1934 and recuperated somewhere near Japan after World War Two”

    They were offered to (and snapped up by) gullible if rich business men.

    Police are still seeking the perpetrators of the scam. News articles do not specify if they were Japanese.

  39. RE:#29 posted by Toby, June 14, 2009 1:39 PM Shouldn’t 40% of $135B USD be $54B?

    53.80 USD = 38.8660 EUR They are just mixing up the Euro and the US dollar.

    Some of this made me recall a story from the mid/late 1990’s on how Prez Bill Clinton “balanced” the budget, having his people sell “un-authorized” notes overseas with his Asian contacts.

  40. Perhaps the bonds were never made to be redeemed, only to fool an auditor of a bank that needed the capital. Are there any banks in Europe or Switzerland that might have large losses? Is this not where the bonds were headed?

  41. reuters (finally) says they are just fakes.

    “Based on the photograph we’ve seen online, they are clearly fake. And not even good fakes,” said Stephen Meyerhardt, a spokesman for the Treasury’s Bureau of the Public Debt.

    He added that there is only $105 million in Treasury bearer bond securities outstanding, so the $134 billion amount seized far exceeds the universe of outstanding securites.

    Pity. Speculation was so much more glamorous than the truth.
    But the best the spokesman can do is look at an online photo? It’s not like the Italian authorities asked for a professional opinion?

  42. That’s an amazing story! The best is to be an
    Italian with a Swiss passport a Japanese Suitcase
    triple featured techlology and …US papers. (Ass-papers or US bonds, what difference does it make?)
    Poor Japanese guys they
    put them in so much trouble for no reason…
    Also a Swiss bank must have lost some garbage for its assets books, and some Italian mafiosos lost
    their commissions. Life sucks (sometimes)

    Greq C. Bacos

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