The wackiest "mystery bonds" story yet. (You just knew someone would bring UFOs into this...)

I think we can now consider the case of the "mystery bonds" well and truly solved. I am grateful for the links to my earlier work. (If you haven't seen that material, scroll down.) Nevertheless, the internet remains filled with nonsensical discussion predicated on the theory that the bonds are real, and that they represent treasury bonds or bearer bonds, not the mythical Federal Reserve Bond.

You will find this silliness not just in the fringe regions of blog-land but in Bloomberg, which really ought to know better. The Bloomberg piece actually suggests that the $134 cache of fake money could "put the dollar on edge"!

This blogger thinks that the bonds are real because the "Japanese" carrying them have not been charged with a crime. What crime? Certainly not counterfeiting: Since "Federal Reserve Bonds" are mythical, one may print and possess as many as one pleases. It's Monopoly money. Crime would occur only if one misrepresented the things.

Nevertheless, the appearance of Monopoly money is taken as a sign that the Apocalypse is nigh:

The evidence as of this writing strongly suggests that a major Central Bank, most likely the Japanese, attempted to liquidate $134.5 billion dollars in US government debt on the black market, at what would have to be a deep discount. The ‘Italian Incident’ is perhaps the biggest news story never to hit the front page.

Assuming this is in fact the case, it means that the market for Treasuries is inefficient.

Oh, tosh. It means nothing of the sort. It means that people do not know how to read, and that's all. The bonds are clearly marked "Federal Reserve Bonds" -- not Treasuries. And Federal Reserve Bonds are a fairy tale. It's fake loot, the kind you hand over when you land on Park Place.

Here are two lessons I take from this tale:

1. People who claim to know about money know less than they pretend. A few hours of internet research would have revealed the non-existent nature of "Kennedy Bonds" and "Federal Reserve Bonds." A little more research would have revealed that the whole backstory surrounding these instruments -- supposedly, they come from a cache of 1934 notes discovered in a crashed DC-10 in the Philippines -- was just a silly yarn invented by a group of con artists.

Instead, financial "experts," in Italy and elsewhere, demonstrated that they can be very expert in imitating Chicken Little.

2. Nobody would have believed this nonsense if the financial world were not on edge. This is something like the fourth or fifth time authorities have busted con-men carrying the exact same fake instruments. All previous occasions did not create a "Chicken Little" reaction.

When it happened in California in 2004, everyone immediately understood that the bonds were fakes and that the con men were, in fact, just con men.

In an earlier case, Graham Halksworth -- a former Scotland Yard expert turned crook -- was arrested, tried and convicted. The bonds seen in the photo above were presented as evidence during Halksworth's 2003 trial. Despite the artificial aging, these "Federal Reserve Bonds" look exactly like the ones that cropped up in the Italian job.

The 2003 and 2004 incidents did not attract much attention. But the late 2008 economic meltdown changed our psychology. Common sense no longer holds sway.

The British case: Take another look at the 2003 trial (also here and here) and you'll find some interesting details. The bonds were to be used as collateral for loans. You want motive? There's your motive.

Former Scotland Yarder Halksworth was paid 63,000 pounds to "authenticate" the fake notes, which he did -- even though the bonds contained spelling errors, even though they were printed with an inkjet printer, and even though their face value exceeded the entire world gold stock in 1934.

Halksworth's partner in crime is an interesting fellow -- Michael Slamaj, a former Yugoslavian spy who ran an engineering company in Vancouver. The participation of a spook indicates that this operation attracted individuals who aren't the normal, everyday grifters you see in films like Matchstick Men and Dirty Rotten Scoundrels.

Former Yugoslav spy Slamaj, 56, said the bonds were issued by the US in exchange for gold given by Chiang Kai-Shek's nationalist government in the 1940s.

A plane carrying them supposedly crashed on the Filipino island of Mindanao in 1948.

Recall that the cult leader who calls herself "Queen Legaspi" claims to be the rightful ruler of Mindanao. (She isn't.) She produced the video embedded here in which one can see a whole room full of these fake notes. I strongly suspect that she or her cronies printed them. Legaspi is married to another con artist who peddles fake cancer cures. Birds of a feather, and all that.

(I wonder if she believes her own con -- at least the religious part of it? Of course, I've often asked the same question about Joseph Smith and L. Ron Hubbard.)

A fairly complete biography of Slamaj can be found in this BBC story. After the former Yugoslavian spook supposedly "found" the bonds in the Philippines (translation: after he visited Queen Legaspi, the lady with the busy inkjet printer), he took them home to Canada.

Slamaj said over the next few months he was approached by numerous middle men who wanted to redeem them.

They included a Russian prince, a member of the Saudi royal family, the grandson of the late Emperor Haile Selassie of Ethiopia, a chief of the Blackfeet Indian tribe in the US, representatives of the Southern Cherokee "nation", and various Chinese, Japanese and German businessmen.

He was also approached by US middlemen, who claimed to have links with the
CIA or the Treasury. One of these was Daniel Todt, a lawyer from Cleveland, Ohio, who persuaded Mr Slamaj to bring a box to the US in June 2001.

Of all the mondo bizarro characters who have ever gotten close to the mystery bonds, Todt must be the mondo bizarro-est. Yes, he's even more bizarre than Queen Legaspi is.

I'm not making this up:

Mr Todt took it [the box containing the bonds] to a Bureau of Public Debt office in West Virginia.

A few days later Mr Todt apparently shot dead his wife Rebecca and their children, Nathaniel, 13, and Dominique, 16, at their home in Strongsville, Ohio, before turning the gun on himself.

Unbeknown to Slamaj, Mr Todt was heavily indebted and faced losing his licence to practise law. He also believed in a story right out of TV's The X Files.

Prosecution witness Ari Jaffe, from the Cuyanoga County Bar Association in Cleveland, told BBC News Online: "He (Mr Todt) was suffering from delusions. "He believed that some time in the 1940s an alien from the planet Atlantis, called Dr Thor De Allah Kahn, met Earth officials at a rest stop in Virginia and handed over some bonds which were supposed to be distributed to improve Third World countries."

So now we have collected no less than three origin stories for the bonds:

Story 1: They were found in the Philippines, in a CIA-owned DC-10 that crashed in the 1930s -- and never mind the fact that neither the CIA nor the DC-10 then existed. (As seen above, Slamaj told a slightly more credible variant which pushed the date up to 1948.)

Story 2: They came to earth via that helpful alien visitor, Dr Thor De Allah Kahn.

Story 3: They were printed on an ink-jet printer owned by a gang of con artists.

I lean toward origin story 3. But maybe I'm just a cynic.

Let's go back to the 2003 story ("Mr Cook" here is the detective who broke the case):

Mr Cook warned many of the bonds were still in circulation.

"There are no genuine Federal Reserve notes from 1934.

"Anyone who is offered them should contact the police or report it to their bank and withdraw from any transaction straight away."

He said this was a common fraud.

"Sometimes it's Gold Dore bonds, or German Third Reich bonds, but 1934 FRNs seem to be the current ones."

What a change in attitude between 2003 and today! Nobody then argued that such bonds must be real. Nobody then believed that the appearance of these bonds presaged economic collapse. Alas, we are heariing a lot of that sort of talk right now.

Actually, back in 2003 someone did take the story seriously -- or at least, someone connected Slamaj to the M fund, which figures in the work of Sterling Seagrave. (That's another story, and a very long one. If you are interested, check out Seagrave's book Gold Warriors.) I don't know who this Harmon Wilfred person is, and I confess that his complex tale baffles me. (Start here.)

Harmon thinks that Daniel Todt was a real CIA agent, that the man and his family were murdered, and that the "alien" yarn was simply an ex post facto concoction designed to make the "murder-suicide" scenario seem credible. Well...maybe. But so far, I see no evidence to support these allegations. And so far, I see no evidence linking Slamaj and his bogus bonds to the tale of the M fund, aside from the obvious fact that both stories involve the Philippines.

Even Harmon thinks that the mystery bonds are fake. He loses me when he starts babbling about massive conspiracies involving Bill Clinton. Maybe Harmon Wilfred and Daniel Todt have a few things in common...?

By the way, Slamaj was given a six-year sentence. He should be getting out of prison soon, if he is not out already. You may want to keep an eye out for the guy. He and his pals remind me of my favorite line from Grandpa Simpson:

"It was the Depression. Back then, you had to grift! Either that, or work."