http://www.dnes.bg/world/2009/06/12/kontrabanda-na-134-miliarda.72493

Two Japanese citizens carrying $134 billion worth of U.S. bonds were detained last week by Italy's financial police at Chiasso (40km from Milan) on the border between Italy and Switzerland, an Italian daily said Wednesday.

According to the report, they include 249 U.S. Treasury bonds each worth $500 million, plus 10 Kennedy bonds and other U.S. government securities worth a billion dollar each.

The two unidentified Japanese citizen were searched on June 3 when they were in Chiasso. They were detained on suspicion of attempting to take a large amount of securities out of Italy without declaring it.

The bonds were found hidden in the bottom of the suitcase, in a closed section separated from the part of the bag containing personal items.

Apart from the securities the Japanese men were carrying a considerable sum of original bank documents.

Investigations are underway to establish the identity and the origin of both the bonds and the bank documents that have also been impounded.

In order to stop money laundering Italian law sets a ceiling of €10,000 per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.

If the certificates were real, the fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.

If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.

The US Embassy in Rome was informed.

If true the two dudes are the 4th largest creditors of the US.

Supposingly they look indistinguishable from real bonds but there are no "Kennedy" bonds, at least not in the denomination that they had in their case, so they are most likely fake.

$134.5 BILLION worth of US bonds seized from smugglers at Swiss border
Posted by Cory Doctorow, June 14, 2009 8:59 AM | permalink 
Two Japanese smugglers were busted on the Italian-Swiss border with a suitcase whose false bottom was stuffed with $134.5 billion in US treasury bonds, including two one billion dollar Kennedy bonds (a denomination used for national currency reserves). Either these guys are the world's dumbest, most ambitious counterfeiters, or they're the biggest currency smugglers ever caught. 

It gets better: Italian law says that the penalty for currency smuggling is 40% of the seized cash, and that 40% (US$28 billion) will take a huge bite out of Italy's public debt. 
If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy's eliminate its public deficit. 

If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud. 

As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police. 

Some important international financial newspapers had already reported on the existence of 'funny money' circulating on parallel, i.e. unofficial, financial markets.

IIRC, all bonds issued by the U.S. government (and most other developed countries, for that matter) have been "registered" for decades.

Registered bonds are owned by the person listed as the owner in the central registry. They effectively cannot be stolen, since the certificate does not convey title (it looks nice in a safety deposit box, however). If the certificate is lost, it can be reissued.

Bearer bonds, in contrast, belong to whomever holds the physical certificate, and can be stolen. Bearer bonds have largely fallen into disuse for a variety of reasons (including the fact that they can be lost or stolen); however, before modern communications systems, registered bonds would have been impractical to buy and sell.

Therefore, if these bonds are real, this "smuggling" and/or "theft" is irrelevant since the title to the bonds does not travel with the piece of paper. If they are fake, then it is a pretty lousy fake since anyone with basic knowledge of how the system works would know that they couldn't possibly be real.

I might note that it's not unlikely that North Korea is written all over these bonds, as they're typically behind things of this nature. Additionally, it also wouldn't be unlikely that the "Japanese nationals" are Koreans with fake passports. 

Certainly with the supposed quality of these fakes, we're likely looking at either super high-quality fakes (North Korea), or some corruption at unbelievably high levels (Federal Reserve? After all, who the money is going to is a "state secret" even from Congress).

Ok, who has $130 billion in bearer bonds? Remember, bearer instruments haven't been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 - a time of high deficits) The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere - to anyone.
Are we willing to assume that all the "issue" of Treasury bonds has been done "above board" as required by law. If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported over the last, oh, say 10 or 20 years, then the following is about to occur: [shitstorm]

IF they are real, they represent an amount around 25% of the Japanese government's US Treasury holdings. Or nearly all of Russia's. No other country holds that much in US Treasuries except China.

If they are fake, how in the world would the forgers think they could get away with this? Why such large denomination, which are normally used only between governments? Why, if they can make such quality forgeries, not make them in more common amounts like $1 million, which would arouse far less suspicion.

My bet is on them being real and either issued by the USA surreptitiously or else they were owned by Japan, who might well be wise to divest themselves of some long term US debt... even losing 40% of their value, they might yet end up coming out ahead.