South Korean firm backs off ‘treasure ship’ claim amid probe

SEOUL - The Associated Press

A South Korean company on July 26 backed off its claim to have found a sunken Russian warship with an enormous cargo of gold as financial regulators began investigating whether the outlandish treasure tale involved stock market fraud.

The Seoul-based Shinil Group said it doesn’t know if any gold coins and bars would be found inside the sunken ship it identified as the Dmitrii Donskoi, which sank 113 years ago. Company officials previously claimed 200 tons of gold worth 150 trillion won ($133 billion) would likely still be aboard the vessel.

“There’s no way for us to figure out whether there would be gold coins or bars on the Donskoi, and if there is, how large the amount would be,” said Choi Yong-seok, Shinil’s president, in a news conference in Seoul.

The company has yet to obtain government permission to raise the ship, which it said divers found more than 400 meters underwater off the eastern island of Ulleung. It’s also unclear whether the company would able to claim ownership of the ship’s assets even if it manages to retrieve them.

Experts had said it’s unlikely that the 6,000-ton Donskoi, a thickly armored warship with more than 12 artillery pieces, 500 sailors and presumably 1,600 tons of coal, would have had room for 200 tons of gold, which would be double the current gold reserves at South Korea’s central bank.

There were also questions about the gold’s worth being estimated at $133 billion - the Bank of Korea’s 104 tons of gold reserves are valued at around $4.8 billion.

Russian officials have said any gold on board likely would have been in the form of coins to pay the ships’ crew.

Choi offered a “sincere apology” for the company’s “unverified” claim of 200 tons of gold worth $133 billion possibly being on the ship, saying that it was based on “speculative” materials and media reports. He said Shinil still hopes to find something of “sufficient financial value” and that the teams who studied the wreck reported finding “multiple bundles of boxes firmly fastened with rope.”

However, Jeff Heaton, a Canadian pilot who operated one of the submersibles that discovered the vessel, told reporters later in the news conference that no such boxes were seen.

An official from South Korea’s Financial Supervisory Service said July 26 that the regulator has started investigating allegations of stock market fraud surrounding Shinil and another local company, Jeil Steel.

Choi, whose investment company owns 50 percent of Shinil, has recently agreed on a deal to become the majority shareholder of Jeil. After Shinil’s initial announcement on the Russian ship, Jeil’s stock prices rose by 30 percent on South Korea’s KOSDAQ market on July 24 and continued to rise the next morning before Jeil in a regulatory filing said it has “no relation to the treasure ship business.” Jeil’s stock prices have since plummeted amid rising skepticism over the claims of gold.