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Wednesday, October 23, 2019

Online pyramid scheme bilks savers out of billions

Updated: 16:53’ - 02/05/2008

Online pyramid scheme bilks savers out of billions

Nguyen Van Dao, a 70-year-old farmer from Dong Thap province, lost his entire savings to a so-called online financial investment. With hopes of getting rich overnight, this man, who earned about VND 30,000 (nearly USD 2) a day from selling lottery tickets, poured his entire USD 900 savings into an investment which could return a 3% daily interest as promised by a couple in his neighborhood. Dao’s money, which he had secured from selling two cows loaned by a local poverty reduction program plus his savings and loans from acquaintances, vanished into thin air as this couple was arrested for joining a major online money trading fraud.

The couple, Nguyen Trung Quan and Nguyen Thi Mong Thu, who had swindled around VND 7 billion out of over 1,500 victims in Dong Thap’s Cao Lanh district, where they lived, were part of a network of the so-called financial investment group Colony Invest Management Inc. which bilked tens of thousands of victims like Dao to the tune of about VND 160 billion (roughly USD 10 million).

The case was investigated by the Investigative Police Department which arrested 15 in early November on charges of appropriating property through fraud under Article 139 of the Penal Code.

One of the arrestees was Vu Thi Thu Hang, 31, living in Ho Chi Minh City, who claimed to be the most senior representative, a general agent of CI, to call for online investment from Vietnamese investors. Others included Hoang Thi Bay, 42, in Lang Son, and Nguyen Van Dan, 34, in Ho Chi Minh City who were all Colony Invest agents.

Hang, who was believed to be one of the leading swindlers and who pocketed VND 25 billion (roughly USD 1.56 million) in the fraud, spent her own money to hold large seminars in Hanoi and Lang Son and Bac Ninh provinces introducing Colony Invest’s multi-level money raising business. These seminars attracted as many as 1,500 participants in Hanoi and 500 in Bac Ninh. According to police estimates, Colony Invest has lured more than 20,000 investors from 10 provinces and cities across the country.

Investigation found that Colony Invest advertised itself a US-based global financial group which invested in top profitable businesses including casinos in Las Vegas, amusement parks like Disneyland and financial markets in London, New York and Hong Kong. The group operated websites www.colonyinvest.net where it offered financial investment services with a utopian interest rate of 3% a day.

The investigation also showed that Colony Invest was just a virtual group which did not register business nor had a headquarters or representative anywhere. There were signs that the website at www.colonyinvest.net was registered by a Hong Kong-based person with the email address likemylikecn@yahoo.com. This website did not specify its owner and contact address. The website stated that Colony Invest opened an account at Hong Kong Shanghai Banking Cooperation (HSBC), numbered 168-315138-838, which, however, was not available in HSBC Vietnam’s banking system.

www.colonyinvest.net was designed in English, Vietnamese, Chinese and Thai, registered on March 20, 2007. Some 55.6% of the website hits were of Vietnamese; 32.5% Thai; 2.6% Chinese; 2% Philipino; and 1.7% American.    

Police investigators said information on Colony Invest’s website about its investment, financial activities and member companies was either false or groundless. This was merely a multi-level business fraud in which investors could hardly get back their money due to lack of legal evidence, they said, citing the fact that the State Bank of Vietnam had so far not licensed a single foreign institution to raise funds online.

The newly introduced online investment had for a short time lured a great deal of investors due to its extremely high interest, ten times that offered by domestic commercial banks. In addition, if investors could attract others to make investment, they would receive huge commissions. The larger the number of investors they could lure, the higher commissions they would get.

The commissions were calculated based on the investment amount and the number of investors. Specifically, the main broker would receive a 2.5% commission on investment of the first four investors, 3% of the fifth and sixth investors and 3.5% of the seventh investor. Investors were also encouraged to form investment brokerage groups whose members were limited at 7. Brokerage groups would get a 10% commission on investment of the first four investors and 11-12% from the fifth investor onward.

According to investigation, all money transfers and business activities were conducted through Colony Invest’s website. After paying money to the immediate broker, each investor was given an account and password without any invoice or document. Their investment interest would be converted into virtual points. Investors could not withdraw the principal but the interest with a fee of as high as 10% plus USD 25 in transaction fee. Instead, they were encouraged to sell their investment points to other investors, thus attracting more investors who merely traded virtual money online among themselves without getting real money.

The investigation found that most investors could not withdraw money from banks and only a few could receive part of their interest, which was a swindlers’ trick to build confidence and trust among investors.

In addition to www.collonyinvest.net, many other websites have been created to attract investors with the same trick, including www.callysinvest.com; www.money100.us; www.c-invest.com; and www.vip-viet.com.

Nguyen Tu Quang, director of the Bach Khoa Internetwork Security Center (BKIS), agreed that online money investment with just an account and password was too risky since there was no evidence of money giving. Legal provisions on such online transactions were either incomplete or unavailable, making it difficult even for investors having evidence to get back their money, he added.

Pham Thanh Binh of the Hong Ha Law Firm said the fund raisers had violated regulations on credit operation and foreign exchange management which allowed only legally established credit institutions to engage in money trading and banking services, let alone that foreign credit institutions must be licensed by the State Bank of Vietnam.

He also pointed out the acts of using the name of a fake foreign company to raise capital with extremely high interest to lure investors constituted the crime of appropriating property through fraud with punishment ranging from 12-15 years of imprisonment to life sentence or even capital punishment.

The Colony Invest scam was not new. One year ago, Golden Rock’s Chief Representative escaped Vietnam, absconding with USD 10 million raised from over 1,000 investors. 

Golden Rock was licensed to set up a representative office in September 2005. Though it did not function as a financial investment company, it lured money from the public by promising high interest rates of 14% and 15% per month. By the end of October 2006, the company had 1,000 Vietnamese clients and 200 staff. In November 2006, Stanley Elliot Tan, Chief Representative of Golden Rock Limited reportedly left Vietnam with USD 10 million in investors’ money. An official from the State Bank of Vietnam said that there had not been an official conclusion from the investigative agency about the case.

The only difference between Hong Kong’s Golden Rock and Colony Invest was that Colony Invest’s investors remitted money by card, while Golden Rock’s had to pay cash at its office in Ho Chi Minh City (VLLF).-

 

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