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Bre-X Minerals Ltd. was a junior Canadian mining company that was once reported to be sitting on an enormous gold deposit at Busang, Indonesia (on Borneo). Bre-X bought the Busang site in March 1993 and in October 1995 announced significant amounts of gold had been discovered, sending its stock price soaring. Originally a penny stock, its stock price reached a peak at $286.50 (Canadian dollars) on the Toronto Stock Exchange (TSX), with a total capitalization of over $6 billion Canadian dollars.
The gold reserves at Busang were alleged to be 200 million ounces, or up to 8% of the entire world's gold. However, it was a massive fraud and there was no gold. The core samples had been faked by salting them with outside gold. An independent lab later claimed that the faking had been poorly done, including the use of shavings from gold jewelry. In 1997, Bre-X collapsed and its shares became worthless, in one of the biggest stock scandals in Canadian history.
The fraud began to unravel on March 19, 1997 when Filipino Bre-X geologist Michael de Guzman jumped to his death (or was pushed) from a helicopter in Indonesia. His body was found four days later in the jungle, partially eaten. On March 26 the American firm Freeport-McMoRan, a prospective partner in developing Busang, announced that its own due-diligence core samples showed "insignificant amounts of gold". A frenzied sell-off of shares ensued. On May 4, independent testing by Strathcona Minerals confirmed unprecedented tampering and falsification, and trading in Bre-X was soon suspended on the TSX and the Nasdaq and the company filed for bankruptcy protection.
Other key Bre-X players were chief geologist John Felderhof and chief executive David Walsh, who fled to the Cayman Islands and the Bahamas, respectively, as the scandal broke.
Walsh died in 1998 still protesting his innocence, and in 1999 the RCMP announced it was ending its investigation without laying criminal charges against anyone. Critics charged that the RCMP was underfunded and understaffed to handle complex criminal fraud cases, and also charged that Canadian laws in this area were inadequate. However, numerous class action suits were filed.
Felderhof remains in the Cayman Islands, which has no extradition treaty with Canada. In 2000 and 2001, the Ontario Securities Commission charged him with insider trading. A trial took place in his absence, but was suspended when the OSC tried to have presiding judge Justice Peter Hyrn removed. This was denied, and on December 10, 2003 the appeal was also denied. It is not clear whether the OSC will appeal to the Supreme Court, restart the case with the same judge, or drop the case.
