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Bre-X Fraud Essay

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Bre-X: an infamous fraud in capital markets Background Bre-X Minerals Ltd. was a subsidiary of Bresea Resources Ltd. founded by David Walsh in 1989. Also as a major part of Bre-X in Canada, it was involved in a gold mining fraud causing a big hit in 1990s. Michael de Guzman was originally a geologist in Philippines. The initiator of evil is that he wanted to receive recognition of the job performance. So after consideration, he had a plan to make fortunes. Guzman cooked up a story to explain that he had found gold in Borneo. In order to make the story credible, he found a high-profile geologist John Felderhof and a Canadian investor David Walsh. The initiator of evil In 1993, David Walsh adopted the advice of geologist John Felderhof to buy a land in the jungle near the Busang River in Borneo, Indonesia (Ro, 2012). The company then started to explore the gold with Michael de Guzman being hired as the project manager. Kilborn Engineering, as an independent consulting company, was appointed to make assessment to Borneo’s gold resource. Booming development of Bre-X The drill program started and this was a fast-developing stage for Bre-X. When collecting gold samples in 1994, the exploration manager Guzman mixed gold from his wedding ring into the samples secretly (Ro, 2012). As a …show more content…

Due to the lack of supervision of related inspection department as well as not enough due care and diligence of the board in Bre-X, Guzman’s conspiracy can be easily deceived for such a long time and nobody even raised doubts. Of many stakeholders, shareholders are the one that affected badly by being misled of the possibility of an economic gold deposit and millions of dollars were wiping out after the rapid drop of stock price. Also, it created a negative impact on other competitors in mining industry because of the damaged confidence of

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