UPDATES

Smuggled $134 billion in T-bonds probably fakes, U.S. says

Speculation about the Italian smuggling case involving $134 billion in purported U.S. Treasury bonds may have been fun while it lasted, but the Treasury Department says today the bonds are bogus.

"They’re obvious fakes," said Treasury spokesman Steve Meyerhardt in Washington.

Two Japanese men were detained by Italian authorities last week after they were caught trying to enter Switzerland with what appeared to be $134 billion in U.S. Treasury bonds in a suitcase.

As I noted in this post on Wednesday, conspiracy theories have run wild in the blogosphere based on the few details that had emerged about the case -- and because mainstream media had largely ignored the story.

Meyerhardt said Treasury authorities could see immediately from photos of the bonds that they were doctored.

What’s more, the package of bonds was said to include "Kennedy" bonds worth $1 billion each. "There is no such thing as a Kennedy bond," Meyerhardt said.

Most important, the total of Treasury paper "bearer" bonds outstanding is a mere $105 million, he said. The Treasury has been issuing bonds solely in electronic form since 1986, although a relative handful of investors never bothered to convert their bearer bonds to electronic form.

And yes, I realize that there’s probably nothing Treasury can say to satisfy people who believe that there’s something more sinister going on here.

The big question, still, is what the apparent forgerers hoped to do with the paper.

Mafia blamed for $134bn fake Treasury bills

In Washington a US Secret Service official said the agency, which is working with the Italian authorities, believed the bonds were fake.

Officials in Tokyo were nonplussed. Takeshi Akamatsu, a Japanese foreign ministry press secretary, said Italian authorities had confirmed that two men carrying Japanese passports had been questioned in the bond case but Tokyo had not been informed of their names or whereabouts.

“We don’t know where they are now,” Mr Akamatsu said.

Italian officials, while pointing out that hauls of counterfeit money and Treasury bills were not unusual, were stunned by the amount involved. Investigators are looking into the origin and destination of the fakes.

Italian prosecutors revealed last month that they had cracked a $1bn bond scam run by the Sicilian Mafia, with the alleged aid of corrupt officials in Venezuela’s central bank. Twenty people were arrested in four countries.

The fake bonds were to have been used as collateral to open credit lines with banks, Reuters news agency reported. The Venezuelan central bank denied the accusations.