Liu Ciyun (who prefers to be known by his eBay handle, “Jinghuashei”) is a typical young upwardly-mobile Chinese suburbanite. Married, with a 2-year-old son, Jinghuashei has worked hard the past few years to build a business.

Like most legitimate businessmen, Jinghuashei operates within the laws of his country, and has earned official certification for his small production facility, which employs up to 30 people. The products he sells are properly licensed, where appropriate, and absolutely, 100 percent legal to produce and sell in China.

The only fault that most Americans might find with Jinghuashei’s business model is that he is in the business of producing counterfeit coins.

Jinghuashei’s company is called the Big Tree Coin Factory. It is located in the Fujian (also known as Fukien) province in the southeast portion of the People’s Republic of China. This area is well known to be a hotbed of counterfeiting activity and Jinghuashei acknowledges being aware of approximately 100 competitors who are manufacturing fake coins.

Jinghuashei says that his coin factory is probably the largest of its type in China. It produces in excess of 100,000 fake coins per month for Chinese coin types alone.

He says he is currently only selling about 1,000 counterfeit U.S. coins per month, mostly on eBay. His primary motivation for servicing this comparatively small volume business is that he is making contacts with people he hopes will come to China to buy counterfeit coins on a wholesale basis.

Jinghuashei also claims a sales volume of several thousand counterfeit coins per month in world coin types.

Legal business
Jinghuashei is forthcoming about his business practices. He is certain that he is operating legally in China, which requires that the coins he makes are dated 1949 or earlier. As long as he sticks to this one important regulation and maintains his business certification (license), he says he has nothing to fear from the authorities in China.

But what about the United States of America?

Isn’t he worried that the Secret Service or some other U.S. government agency will come after him for making counterfeit U.S. coins? After all, the coins struck by the U.S. Mint, regardless of date, are all still legal tender, and thus subject to U.S. coin counterfeiting laws. It is illegal for him to sell these coins in the United States, even via eBay.

Jinghuashei responds by claiming that he is operating within the confines of the Hobby Protection Act, a U.S. law that requires all nongenuine numismatic items produced after 1973 to be permanently and conspicuously counterstamped with the word COPY. When informed that his eBay auctions are not in compliance with this law, because he is using a punch that says REPLICA, he seems unconcerned.

Despite numerous online chats and e-mail exchanges with him in which the U.S. law has been discussed, Jinghuashei still hasn’t changed his punch to be in compliance.

Although he has never said it outright, it is apparent he feels invulnerable to U.S. law enforcement because they are unlikely to go all the way to China to prosecute him for the relatively small sums of money his eBay sales generate.

The word “replica” was used in conversations with and questions of Jinghuashei since that is the term he prefers and he appears to be more open to talking than if the terms “counterfeit” or “fake” are used.

Production costs
Jinghuashei acknowledges that the minting equipment currently used in his Big Tree Coin Factory is old and the images he provided show a cramped and dirty environment. But that helps to keep Big Tree’s coin manufacturing costs very low. He says he has access to more modern presses when he needs them.

Jinghuashei says it costs him only 8 cents each to produce each fake Chinese coin using iron-based planchets. Counterfeit U.S. coins cost more – an average of 50 cents each – because the copper and nickel planchet alloys cost him more to make. Jinghuashei says these figures include his entire expense, including materials, labor and marketing.

On eBay, Jinghuashei’s single-coin auctions are usually listed with a starting price of 5 or 10 cents, and they usually close around those prices when he gets a buyer.

Asked how he makes a profit if it costs 50 cents each to make his coins, he explains that he makes most of his profit from the shipping expense he collects from buyers.

This is a common practice with China-based sellers on eBay. They sell the item very cheaply, but then charge as much as $70 or more for shipping. Doing this serves two useful functions. First, their Final Value Fee expense is minimal, since eBay bases this fee on the auction’s closing price. Secondly, if an item is returned to the seller for some reason, the buyer can only recover that minimal bid amount since shipping and handling is typically nonrefundable.

Most of the Big Tree Coin Factory’s current profits are coming from the large number of fake Chinese coins it produces. Many of these coins are replicas of ancient Chinese coins. There is a strong demand for them at flea markets and in tourist zones. Jinghuashei does an active wholesale business in fake Chinese coins, most of which are sold within China itself.

Some of the photos Jinghuashei provided of his storefront operation, the Big Tree Temple Coin Shop, depict fake Chinese artifacts, but he says that some of the goods for sale in the shop are produced by other counterfeiters.

Also evident in photos he provided are what appear to be slabs similar to ANACS slabs, and containing fake U.S. coins. When queried about the slabs in this photo, he became very wary.

“They’re not mine,” he said.

After examining the image, an ANACS spokesman noted the gasket used in the holder is black and does not properly fit the coin. He said ANACS has never used a black gasket in its holders. While the holder appears to mimic some ANACS holders, it does not appear to be an exact copy. All of the slabs in the image carry the same information on the grading tab and all of the coins are counterfeit 1877-CC Trade dollars. The number used is for a coin of a different denomination graded by ANACS in 2005.

Asked whether he has the capability of making “replica” Professional Coin Grading Service slabs, Jinghuashei repeatedly responds that he is not intentionally deceiving anybody with his coins. He insists that he sells them openly and clearly as “replicas,” but if other people do dishonest things with them, that is not his fault.

The subject of fake PCGS slabs generates an interesting response from Jinghuashei. He vehemently denies having anything to do with fake PCGS slabs, claiming that they are “big trouble.”

But during a recent conversation where fake PCGS slabs were the topic of discussion, a photo alert popped up in the instant messenger chat program. The photo shows a 1916 Chinese silver coin in a PCGS slab. Asked if the slab is genuine, he said, “Yes, and the coin is, too. I collect silver Chinese coins myself.”

Jinghuashei has been branching out in recent weeks, listing on eBay entire collections of fake U.S. Trade dollars, Morgan dollars, Barber half dollars and other larger diameter “silver” coins.

These collections are already housed in what appear to be Dansco albums. Asked if the albums are also fake, Jinghuashei responds: “Of course!”

Like most Chinese businessmen in the counterfeiting industry, Jinghuashei takes great pride in producing a fine, high-quality product that is difficult to distinguish from the real thing.

Terminology differs
Terms are specific
 

Although sometimes the terms describing nongenuine coins are used interchangeably in the numismatic community, each term actually has a narrow, specific meaning to some sources.

A quick primer:
Counterfeit: A coin that is meant to trade at face value and deceive people in ordinary commerce. (Usually does not fool a knowledgeable numismatist.) Sometimes, however, “counterfeit” is used in the same sense as “forgery.”

Replica: Intended to be a replacement for a very rare or expensive coin. Although replicas are usually exact reproductions, they’re not generally meant to deceive the expert. Often sold as “space fillers” for coin albums, they are often made of the same metal as the original.

Copy: Frequently made by museums or for advertising purposes; meant to celebrate or honor a given type, not pass for it. Usually made from the wrong metal alloy.

Forgery: Generally understood to mean a nongenuine coin that is intended to pass as the real thing on the hobby market. Quality varies from poor to extremely deceptive.

Reproduction: Generally the same as a replica, but without the attention to detail. Metal is usually the right color, but not necessarily the proper alloy (e.g. using copper-nickel rather than silver).

Last week we met Liu Ciyun (who prefers to go by his eBay handle, "Jinghuashei"), a 26-year-old Chinese coin counterfeiter who owns his own coin minting facility, the Big Tree Coin Factory. Jinghuashei is very open about what he does because he says his business is completely legal in China, as long as the coins he fakes are dated prior to 1949.

In preparing to write about Jinghuashei and his counterfeiting operation, Coin World procured some of Jinghuashei’s fake U.S. coins.

Although they look quite deceptive in the photographs, the only way to truly judge a coin is to hold it in your own hand.

Jinghuashei agreed to leave off the REPLICA counterstamp that he says he usually applies to his coins.

He was told Coin World would test his coins and also that eventually they may be placed on display so that other collectors could learn about his fine coin “replica” work.

The 12 coins purchased from Jinghuashei are shown at actual size with an accompanying chart listing weights and the results of a specific gravity test conducted on each in Coin World’s lab.

Jinghuashei’s 1909-S Lincoln, V.D.B. cent appears to be the most deceptive. Most of the rest of his coins are very good counterfeits as well, but they also look “just struck” (which, of course, they are)!

All that would be needed to make Jinghuashei’s coins really scary fakes would be to “process” them in a rock tumbler or maybe dip them in some weak acids, to “age” them somewhat and take the sharpness off the edges.

While Jinghuashei’s coins may not fool counterfeit coin detection experts such as Michael Fahey, there is a strong likelihood the average collector may accept these coins without question, especially if he or she does not possess advanced knowledge of diagnostics of the particular series.

Current technology
Asked how he manages to produce such convincing counterfeits, Jinghuashei explains that he uses genuine examples for his models.

He downloads digital information about the genuine coin into a computerized coin sculpturing system via laser beam input. The laser system scans the coin using a method of triangulation, taking constant readings from thousands of different data points, producing a three-dimensional model of the coin that is extremely accurate.

If needed he has the ability to “clean up” the digital model to remove blemishes or distinguishing diagnostics that were on the original coin such as contact marks, die chips, die polishing marks or even flow lines on the struck coin.

He noted that everything is done with a view to making the die that is produced as spotless as possible so that nothing will give away the coin struck from it as a counterfeit.

The next step in the process is to render the three-dimensional computer file into an actual coin die. A laser die-cutting process carves the coin image into the steel surface, which is added to a base (die shank) and then the dies are ready to be placed into the coin presses to strike actual pieces.

Jinghuashei couldn’t be too specific about some of these processes, and eventually admitted that he has the dies made in another shop that specializes in this type of work.

The coins that are produced appear in every way identical to the genuine coin used as a model except where the improvements were made in cleaning things up in the three-dimensional image.

The Big Tree Coin Factory has a variety of coin presses, ranging from modern automatic machines that strike many coins very quickly, to old-style hand-operated presses that strike coins one at a time.

The reason for this, according to Jinghuashei, is that by using the original coin presses that were used to produce the very old coins (e.g. 19th century types), the counterfeit that is produced is much more likely to be just like the genuine specimen.

The biggest challenge Jinghuashei currently faces is in getting proper planchet stock. He does not mix the metal alloys in his mint, so he must buy rolled stock from others, who are not getting the alloy correct most of the time. This causes the coins to be overweight or underweight, and also to be the wrong color sometimes.

He says he can use cheap “white metals” for fake silver coins and not be too far off on the weight. And he notes he has a big customer for fake early U.S. copper coins dated in the 1800s, if he can get the weight and alloy problems solved.

Error coin expert Fred Weinberg says the Chinese have done a lot more than just counterfeit the U.S. coinage. He explains that the Shanghai Mint was intentionally designed to be a replica of the U.S. Mint at Philadelphia as it looked in the early 1900s.

According to Weinberg, the Chinese made a faithful copy of the facade of the Philadelphia Mint as a tribute to the U.S. Mint, which sold Shanghai a great deal of obsolete minting equipment back in the 1920s.

Although Jinghuashei says he does not know if his particular minting equipment might have come from some of this same stock, other sources knowledgeable about Chinese counterfeiting say that the Shanghai Mint began selling off all of the U.S. Mint equipment as scrap starting in the mid-1950s. Thus it is possible that one or more of the presses now striking counterfeit coins at the Big Tree Coin Factory at one time were used in a U.S. Mint facility.

Counterfeit error coins
One of the biggest emerging threats to the U.S. numismatic marketplace at the hands of the China-based counterfeiters is their recent entry into the counterfeit error coin field.

Jinghuashei takes pride in the fact that he can produce nearly undetectable counterfeits of certain U.S. coin types because he is producing them on the same types of machines from which the genuine coins were struck.

Consider the fact that one of the best anti-counterfeit diagnostics that the error coin community has for detecting fakes – especially 19th century coin types – is that the counterfeiters usually use the wrong equipment to create their multi-struck and off-center counterfeits.

If the Big Tree Coin Factory can create quality counterfeit error coins of these earlier types using the proper pieces of minting machinery, their fakes could become a real problem.

Although Jinghuashei has only recently begun experimenting with the possibilities of counterfeit 19th century error coins (such as off-center half cents and double-struck Shield 5-cent coins) he sees this as an area with excellent growth potential because customers have been asking for these coins.

Like all businessmen who operate legally under the laws of their country and take great pride in their quality products, Jinghuashei is open and optimistic about the future.

When the U.S. economy improves, he expects to sell a much higher volume of counterfeit U.S. coins of all types for distribution in the American numismatic marketplace.

Jinghuashei is an affable, friendly fellow, who has so little fear of U.S. prosecution (partly because the United States hasn’t done much in the past to go after the Chinese counterfeiters) that he provided several photographs of himself with his wife and his son. At first he was reluctant to allow his picture to be published, but he finally relented.

Jinghuashei is quick to admit that most types of counterfeiting actually are illegal in China, such as producing fake Tiffany jewelry and designer handbags.

But as long as China’s laws permit him to make counterfeit U.S. coins, Jinghuashei says he will continue to practice and perfect his art in the time-honored Chinese fashion of quality counterfeiting.

During the eight-month investigation of Chinese counterfeiters many contacts were made, but one – known by his eBay handle of Jinghuashei – stood out above all others.

He has a certain naiveté that is at once charming and suspicious.

What kind of soul does one have, to be a third-generation coin collector, and yet strive to perfect the fakes he injects into the numismatic marketplace at the rate of more than a million a year?

How can a man who makes his living as a counterfeiter be the victim of numismatic scams himself?

Who, really, is Jinghuashei?

During our conversations, details emerged.

Jinghuashei learned about classic collectible Chinese coins at his father’s knee, as a 6-year-old, and says he was soon able to pick out the genuine examples from among all the fakes at the tourist stalls. He doesn’t know how the occasional genuine coin gets mixed in, just that it does.

Jinghuashei honed his eye for coins through his later childhood and teen years, and by his mid-teens he was able to cherrypick the higher grade and variety coins from dealers. He sent them to Professional Coin Grading Service to be encapsulated, one coin at a time, slowly buying and selling his way into enough money to start his own business.

He met the girl of his dreams at age 20 and later married. Their son, who is 2 now, changed his life.

Jinghuashei characterizes himself as a “very naughty boy” during his school years, always near the bottom of his class academically. But now he works 18 to 20 hours a day, just to stay ahead of destitution, because the economy is so bad in China. He wants to make a good life for his wife and son.

Jinghuashei has always wanted to own a business, something that is very important to him, even though he knows it means he has to work harder and lead a riskier lifestyle financially. He believes that with hard work he will retain his freedom from reporting to an employer, and he’ll be well-off someday.

Although it took a long time before he would admit it, he is beginning to have misgivings about his business of making counterfeit coins. When asked if he sees any conflict in his heart between collecting (genuine) classic Chinese silver coins, and producing deceptive fakes of these same coins, Jinghuashei admits that he never thought about this conflict before, until my questions made him aware of how Americans feel.

He doesn’t want to be in a business where he is despised, and when it is suggested that his mint could make an honest income striking legitimate tokens and medals as a subcontractor for U.S. firms, he wants to learn more about how to enter this business.

Jinghuashei has been the victim of American scam artists. He provides convincing documentation of one case where a U.S. buyer charged back a transaction for (unmarked) Morgan 90 percent silver dollar counterfeits. Even though Jinghuashei could prove to PayPal that he had been doing business with this buyer for more than a year, PayPal believed the buyer’s story that his passwords had been stolen and that this one high-value transaction wasn’t really his.

He might also be the victim of bad advice from eBay. Jinghuashei insists that he was stamping his coins with a COPY stamp, until eBay threatened to pull his auctions if he did not use a stamp that says REPLICA. EBay still hasn’t responded to this allegation, although an investigation is under way.

He is apprehensive about what the publicity this two-part series generates might mean to him, but he didn’t want to miss the opportunity to tell his side of the story to Americans. He feels the Chinese are greatly misunderstood, and he hopes to travel to America someday so he can understand Americans better. It is very unlikely that he will get a travel visa from the People’s Republic anytime soon.

In the meantime, he will work hard, expand his firm, and try to develop a more acceptable product line.

The counterfeiting of general goods and infringement of intellectual rights (such as software piracy) in the People’s Republic of China (PRC) comprises a significant portion of China’s overall economy. Consider these facts:

- In 2006, an estimated 8 percent of China’s Gross Domestic Product (GDP) was generated from counterfeiting.

- The PRC’s own State Council Research and Development Center estimated that there were $19 billion to $24 billion worth of counterfeit goods flooding China’s economy in 2001.

- Brand owners estimated that 15 to 20 percent of all well-known brands in the PRC are counterfeit.

- Up to 80 percent of all worldwide counterfeiting is done in China, according to some estimates.

- In 2005, U.S. Customs seized $93 million worth of counterfeit and infringing goods, nearly 70 percent of which came from China (and this is only what Customs actually caught entering the country, which is probably a small percentage of the total).

- The manufacture of counterfeits is primarily centered in the two southern Chinese provinces of Fujian and Guangdong.

The threat of an undetectable counterfeit Professional Coin Grading Service holder is one of the direst threats the U.S. numismatic community faces.

Millions of dollars’ worth of PCGS-graded coins trade on the sight-unseen market every week based on the strong market confidence in PCGS holders and the coins they contain.

Although there have been attempts to produce counterfeit PCGS holders for years, a spate of Chinese-made fake holders containing counterfeit coins turned up in spring 2008.

PCGS was reluctant to disclose the diagnostics that would allow collectors to detect the fake holders for fear of educating the counterfeiters in what they were doing wrong.

As the months have passed, PCGS has improved its security. In the meantime, anecdotal reports circulated about how to detect the fake holders.

The first concrete information in major media was published by Random House, in the sixth edition of Scott A. Travers’ Coin Collector's Survival Manual.

Coin World published photos of a fake PCGS holder in its Oct. 27, 2008, issue, along with Travers’ findings that the fake slabs did not stack with each other, nor did they stack with genuine PCGS slabs.

As part of its recent research into Chinese coin counterfeiting rings, Coin World was given several more of the key diagnostics by one of the counterfeiters. Using the photo supplied by Travers, we have marked the important things to look for on the fake PCGS holder, and have shown a genuine holder for comparison.

Fake PCGS holder diagnostics
If you do not have the holder in hand, and must judge from an image, the easiest diagnostic to see is marked A.

Beware of online sellers who crop the edges off the slab photo to hide these distinctive flaws.

• On the fake holders, you will see a broken line and sometimes an oblong hole or space in the area marked as A on the image.

• On genuine PCGS holders, there are no rectangular spaces or gaps and no breaks in the raised ridge in the area marked A on the image. This area should appear a solid, uniform color.

For diagnostic B, you must have the holder in hand to make this judgment. There are four little raised L-shaped ridges that fit snugly and precisely into the back frame of another genuine holder placed on top.

• On the fake holders, these L-shaped ridges are low, a little too thick and poorly formed compared to the genuine ones. They don’t fit snugly, preventing the slabs from stacking properly.

• On the genuine PCGS holders, these L-shaped ridges are taller, thinner and fit exactly into the back of other genuine holders.

Diagnostic C usually cannot be seen in photos at all. There should be four circles inside the back part of the holder, in the positions indicated. You may need to tip the holder to the light in various ways to see them.

• Fake PCGS slabs are missing these four marks. The back side will be smooth, slightly frosted plastic in these zones.

• Genuine holders have four little circles, all the same size, each about 3 millimeters in diameter. You cannot feel them on the outside of the holder; they are plastic injection-molding marks inside the back part of the slab.

Although the counterfeiter who provided the diagnostics noted some differences in the size and details of the letters on the blue slab insert, further research indicates that genuine PCGS holders have some variation in letter size and placement. Such lettering variation is not a reliable diagnostic unless the lettering is of a poor, mushy quality.

Keep in mind that the certificate numbers on a fake slab usually check out when verified on the PCGS Web site. Just because the certificate is valid doesn’t mean the holder is genuine!

Verifying older PCGS holders
The diagnostics provided are the most consistent, certain determiners between the genuine and fake PCGS slabs with blue label inserts. To verify and compare the characteristics of older holders, and the holders of other grading services, check the photos available on SampleSlabs.com.