The scheme dates back to 2015, when a first loan of 20 million yuan (€2.5 million) was granted to a farmer named Yang Jun by the Tongguan County Rural Credit Cooperative in Shaanxi province, according to Chinese magazine Caixin.

As collateral for the loan, Yang left 26 gold bars with a total weight of 100 kilos.

With more than 154,000 inhabitants, Tongguan is estimated to have 110 tons of gold deposits in the Qinling mountains. Gold mining accounts for more than 70% of the local economy.

"The scene did not surprise anyone at the Tongguan Cooperative, which is in charge of meeting the financial needs of a county known for its rich gold reserves," the publication explains. "Farmers who carried gold bars for loans was a common scenario at the Cooperative," the article adds.

However, confidence in the credit scheme was shaken in April 2016, when after Yang Jun failed to pay off his debt, the Tongguan Rural Credit Cooperative began to melt down the gold bars.

"After the glossy gold on the surface melted, it turned out to be a black tungsten plate, and the Tongguan Cooperative found out that Yang's bars contained only 36.5% pure gold," Caixin wrote.

A subsequent inspection by China's main banking regulator found tons of adulterated gold in the vaults of several banks in Shaanxi and Henan provinces, including the local branches of two of China's largest banks, the Commercial and Industrial Bank of China (ICBC) and the Postal Savings Bank of China (PBS).

The adulterated gold served as collateral for a total of 19 billion yuan (€2.4 billion) in loans.

According to Caixin, the investigation found that most of the loans flowed into five personal accounts controlled by businessman Zhang Qingmin, founder of the gold refinery Lingbao Boyuan Mining Industry Co. Ltd., and its associates.

Chinese police have arrested four of the top five suspects and dozens of accomplices, who have already been tried and are awaiting verdict. Eight employees of the Tongguan Cooperative have also been charged criminally.

However, Zhang Qingmin, 34, the prime suspect in the scheme, reportedly escaped with his family as the adulterated gold bars caught the attention of regulators.

According to Chinese police records, Zhang Qingmin flew to Portugal via Cyprus on 12 May 2016. Interpol has already issued a red alert and an international arrest warrant.

In May 2016, police shut down the Lingbao Boyuan Mining Industry refinery, established by Zhang Qingmin and his brother Zhang Shumin in 2007.

It was one of the major refineries in the city of Lingbao and an official supplier of standard gold bars to the Shanghai Gold Exchange.

In the factory complex, the police found the hidden facilities where the tungsten adulterated gold bars were manufactured.