South Korean firm backs off 'treasure ship' claim amid probe

A South Korean company on Thursday 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.

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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 bizarre news conference in Seoul.

Choi said he was in his first day as the company's president, following the withdrawal of his predecessor Ryu Sang-mi and other board members who Choi said felt "burdened" by heightened public suspicions that the gold claim masked a financial scam.

Choi denied any wrongdoing. But he failed to clearly explain why one of Ryu's relatives was operating a Singapore-based company of the same name that had conducted private sales of its cryptocurrencies while reportedly promising dividends from profits created by the gold found on the ship. Ryu didn't attend the news conference.

Shinil has yet to obtain government permission to raise the ship, which it said divers found more than 400 meters (0.25 miles) 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 a small amount, 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 Thursday 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. If the deal goes through, Ryu would be Jeil's second-largest shareholder.

After Shinil's initial announcement on the Russian ship, Jeil's stock prices rose by 30 percent on South Korea's KOSDAQ market last Tuesday 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.

The FSS official, who didn't want to be named, citing office rules, said the regulator was looking into various possibilities of deceptive practices, including whether investors were induced by a deliberate distribution of false information.

Choi denied the suspicions of stock market fraud. He also said his company has nothing to do with the Shinil Gold Coins being sold by the eponymous firm based in Singapore. However, Choi admitted that the effort to find the ship was initially launched by the Singapore-based company. The Seoul-based Shinil wasn't established until June.

"Chairman Yu Ji-beom (of the Singapore-based Shinil Group) began the search efforts, but the (South Korean) Shinil Group that's trying to raise the Donskoi is a new company that was created to better protect Donskoi's value as a historic asset," Choi said. He provided no further details about the business connections between the two companies and later rushed out of the conference room as reporters pursued him for more questions.

It's unclear whether Shinil would receive government approval of its salvage plans. Local laws aimed at preserving national territory and property require the company to deposit 10 percent of the estimated value of the shipwreck before starting its salvage works.

The Pohang Regional Office of Oceans and Fisheries had earlier said Shinil must deposit 15 trillion won ($13 billion), based on the company officials' initial assessment about how much gold is likely aboard the ship. Shinil disagreed on the amount of its possible deposit, saying what it has officially located was the shipwreck, not treasures on it. It estimated the shipwreck's value at 1.2 billion won ($1 million) and planned to put down 120 million won ($107,000) as a deposit.

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