US Coins

Feds investigate counterfeit mutilated U.S. coins from China

Federal prosecutors say several U.S.-based metal recyclers conspired in an elaborate scheme to bilk the U.S. Mint out of more than $5.4 million. The firms were allegedly attempting to be paid for large mutilated quantities of what are allegedly counterfeit U.S. coins imported from China.

A civil complaint was filed March 20 in U.S. District Court for the District of New Jersey in Newark, seeking forfeiture of the funds, which had not yet been paid to the recyclers for the redemption of mutilated copper-nickel clad dimes, quarter dollars and half dollars under the Mint’s Mutilated Coin Redemption Program.

The funds were to be paid to three different companies for 2014 shipments of mutilated coins, which were later determined after sampling to be counterfeit.

The $5.4 million is currently in the custody of federal authorities, according to the complaint.

The three firms are identified as America Naha Inc., Wealthy Max Ltd. and XRace Sports Co. Ltd.

Investigators with U.S. Customs and Border Protection were first alerted to possible problems in 2009, based on the increased shipments of mutilated coins passing through the Port of Los Angeles, according to the federal complaint.

Those concerns were passed along to investigators with Homeland Security.

A metallurgical analysis by a CBP laboratory from a sampling of mutilated coins taken from circa 2010 and 2011 shipments by one of the suspect firms determined that not only was the percentage of copper and nickel off from genuine U.S. coins, the composition also included aluminum and silicon, neither of which has been used in a circulating U.S. coin.

Analyses of samples from subsequent shipments yielded the same elemental anomalies, according to the complaint.

Examination of the samples also determined the purported mutilated U.S. coins to have been uniformly mutilated by mechanical means, before being subjected to chemical treatment to corrode their appearance, according to the federal complaint.

Too many half dollars

In addition, the number of half dollars redeemed is higher than the number the U.S. Mint has produced, according to prosecutors.

“Interestingly, United States Mint personnel also believe that more half dollars have been redeemed by China-sourced vendors in the last 10 years than the United States Mint has ever manufactured in its history,” according to the complaint filed by Assistant U.S. Attorney Lakshmi Srinivasan Herman.

The Mint’s Mutilated Coin Redemption Program, which was first implemented in 1911 and is currently under regulatory review, pays $19.84 per pound of copper-nickel clad dimes, quarter dollars and half dollars redeemed.

All three denominations are struck from the same composition of outer layers of 75 percent copper and 25 percent nickel bonded to a core of pure copper.

None of the shipments described in the complaint contained cents, and only a few contained 5-cent coins, according to the complaint.

The U.S. Mint loses money on the redemption program because it makes money only on the metal it recovers, which is less than the face value of the redeemed coins, according to the federal complaint.

Uncurrent and mutilated coins submitted to the U.S. Mint for redemption are eventually melted for reclamation by one of two vendors that provide the U.S. Mint with coinage strip for the three denominations — PMX Industries in Cedar Rapids, Iowa, and Olin Brass in East Alton, Ill.

According to the Mint’s redemption guidelines, “uncurrent coins” are “U.S. coins which are merely worn or reduced in weight by natural abrasion yet are readily and clearly recognizable and machine countable.”

“Mutilated coins” are “all coins that are bent, broken, corroded, not whole, melted together and not machine countable.”

The importers of the coins from China claim, according to the federal complaint, that the coins they submitted for redemption to the U.S. Mint were recovered from salvaged automobiles shipped to China as scrap metal, or from other scrap metal sources.

Based on manifests for the number of cars exported to China and the number of coins submitted for redemption during the period outlined in the complaint, each car would have had to contain the equivalent of $900 worth of the copper-nickel clad coins, according to the complaint. 

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