A court in the eastern province of Zhejiang has sentenced three men for a new multinational business – retrieving thousands of coins from old clothes transported in waste containers to China and exchanging them for euros at seven banks in Germany.
The men – Lin Xiangbin, Li Qiguo and Zhang Shiwen – received prison terms of between 7-1/2 and nine years and fines of between 2 million yuan (US$322,380) and 6 million yuan from the court in Taizhou city on May 14.
It has been five years since the German police received information about this business. They were given a report that a teacher at a Lufthansa training school and two Chinese stewardesses with the airline were exchanging thousands of euros and deutschmarks at the Bundesbank.
In March 2011, they arrested six people, two Germans and four Chinese, at four cities and seized three tons of coins and a processing machine. The six admitted receiving large quantities of euros from China but denied they were doing anything illegal.
Unsure how to proceed, the German police asked their Chinese counterparts for help. After months of investigations, they discovered how the operation works.
Each year, thousands of waste, including clothes, are shipped from Europe to China, including ports in Guangzhou and Haimen in Zhejiang, where workers sort and divide it; they sell many items that can be re-used.
Lin, who formerly ran a small shoe repair shop, set up a three-storey workshop at his home in a suburb of Taizhou. He bought large amounts of these waste clothes from nearby Haimen and employed workers to remove the coins.
When police arrested him on Boxing Day 2011, they removed from the workshop more than 10 tons of European currencies, including 10,736 euros, 15,780 Irish punt, 1.859 million Swedish kroner and 101,680 British pounds. The business, which flourished between 2005 and 2011, also involved Danish, Swiss, Austrian, Italian and Norwegian currencies.
The indictment against Lin and his two associates said the three had made an illegal profit of more than 130 million yuan from buying large quantities of foreign coins and illegally processing and trading them.
The man who started the business was Zhang Shiwen. In 1994, he was in Japan trading waste plastics; he discovered that banks would exchange old coins for new ones and switched to this more lucrative line of work.
In 2003, he bought 700 kg of old deutschmarks for a rate of one yuan to one when the market rate was four yuan to one. He cleaned and polished the old coins and sent them to Germany to be exchanged at one of the seven branches of the Bundesbank that will accept such coins.
A German associate took them to the Bundesbank branch in Heidelberg; it rejected the coins as too damaged. Zhang flew in person and cleaned the coins with soap in the office of his associate and persuaded the branch to accept 50 per cent of the coins. Then he bought metallic tools and polished the rest, enabling him to exchange 95 per cent of his shipment.
Lin, Zhang and Li also found that there is an active market in China for old Europeans coins — street markets, collectors and people who had returned from Europe; also there are buyers who want them ahead of a journey to the EU. They are traded over the electronic platform Taobao.
These coins, damaged to one extent or another, are sold for less than the cost of buying new euros or other European currencies.
Last October, two Chinese tourists paid for their hotel room in France with 70 one-euro coins. Fearing that they were fake, the hotel owner called the police; a coin expert from Paris ruled they were genuine but damaged.
Members of the same tour group carried 3,700 one-euro coins; they said that they had bought them at a market in China for scrap metal.
Having arrested their suspects, the German and Chinese police were in a quandary as to what to charge them with. In November 2012, the Federal High Court in Frankfurt dismissed the charge that the six men were guilty of dealing with fake currency. They overturned the guilty verdict reached earlier by a court in Frankfurt.
The Chinese prosecutors were also perplexed since they had no legal precedent to work with and the banks in Germany had been willing to exchange the money. So they changed the charge from the original “dealing with fake money” to “illegal economic activity”.
The indictment said they had conducted foreign exchange trading outside the national markets, causing disorder to the markets. The State Administration for Foreign Exchange Control ruled that this was illegal trading of foreign exchange, it said.
It was on this charge that they were found guilty – a harsh ending for three very entrepreneurial men.
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