China's biggest Ponzi scheme: All you need to know about such scams http://str.sg/ZjKi
Source: The Straits Times, Published Feb 1, 2016, 2:33 pm SGT
Nearly one million investors may have been fleeced in China's latest Ponzi scheme, which over the weekend saw 21 executives from its biggest peer-to-peer money lending platform being arrested on suspicion of stealing 50 billion yuan (S$10.8 billion).
The police allege that the senior management of Ezubao had stolen that much money from 900,000 investors nationwide, which would make it China's largest-ever case of investor fraud, by both cash value and the number of victims.
By number of victims, it would be the largest Ponzi scheme in the world.
Here's what you need to know about Ponzi scams:
What is a Ponzi scheme?
A fraudulent investment scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by using the cash from new investors. Such scams actually yield the promised returns to earlier investors, as long as there are more new investors.
But they eventually collapse on themselves when the new investments slow or stop.
Who is the scheme named after?
One Charles Ponzi, a clerk in Boston, who did not invent the scheme that came to bear his name, but whose scam fooled so many people and made him so much money that it brought the such a scheme into the national spotlight for the first time.
In 1919, the Italian immigrant duped thousands of investors, promising them a whopping 50 per cent return in 45 days, or 100 per cent in 90 days on international postal coupons, which he never actually purchased. The international reply coupons from other countries were supposed to be redeemable in the US for postage stamps, with the profit coming from the difference in prices between countries.
A steady flow of new investors initially allowed Ponzi to pay existing investors, while pocketing millions of dollars himself.
But soon enough, the scheme began to raise eyebrows because there were not sufficient international reply coupons for his investment plan to work. It collapsed, bringing six banks down with it. Collectively, his investors lost an estimated US$20 million - equal to US$222 million (S$416 million) in today's money.
Ponzi went to prison for several years but after his release, he launched another scheme where he sold real estate that was literally underwater. He was jailed yet again and ultimately died penniless in Brazil, working as a translator.
Is a Ponzi scheme the same as a pyramid scheme?
They are similar in that both are based on using money from new investors to pay the earlier ones.
But there is one important difference: In a Ponzi scheme, the mastermind gathers all the money from new investors and then distributes them. Pyramid schemes, on the other hand, allow each investor to directly benefit depending on how many new investors are recruited. The person at the top of the pyramid does not at any point have access to all the money in the scheme. Pyramid schemes are illegal in most but not all countries.
For both schemes, however, eventually there is not enough money to go around and the schemes unravel.
What is the biggest Ponzi scheme ever?
There have been many famous Ponzi conmen throughout history, especially in recent years. But the biggest schemer by far was Bernie Madoff.
Madoff stole US$65 billion from thousands of investors from the ordinary to the ultra-rich and famous. A respected former chairman of the Nasdaq stock market, Madoff started his Ponzi scheme in 1986 under the guise of a successful hedge fund - and ran it successfully for 23 years.
But the global financial crisis led to his undoing. In 2009, Madoff received redemption requests worth US$7 billion, which he was unable to meet. He confided his problems to his two sons, who reported him to the authorities.
Madoff is currently serving a 150-year prison sentence. One son hanged himself in 2010 on the two-year anniversary of his discovery of the fraud; the other died in 2014, blaming his cancer relapse on the stress and shame he suffered from his father's massive scam.
Sources: Investopedia, Bloomberg News, Time
China police bust massive S$10.8b Ponzi scheme with over 900,000 investors
http://str.sg/Zjzm Published Feb 1, 2016, 11:28 am SGT
http://www.straitstimes.com/business/companies-markets/china-police-bust-massive-s108b-ponzi-scheme-with-over-900000-investors?movideo_m=1434885
SHANGHAI - Authorities in China have busted what may well be the country's biggest illegal fund-raising case in terms of money and the number of investors, according to media reports on Monday (Feb 1).
Police arrested 21 people involved in the operation of peer-to-peer (P2P) lender Ezubao, the official Xinhua news agency said on Monday, over an online scam it said took in some 50 billion yuan (S$10.8 billion) from about 900,000 mainland investors.
Ezubao was a Ponzi scheme, the Xinhua report said, and more than 95 per cent of the projects on the online financing platform were fake.
Among those arrested was the scheme's alleged high-flying mastermind - Ding Ning,chairman of Yucheng Group, which launched Ezubao in July 2014.
The suspects are accused of luring in investors with false offers of double-digit annual returns.
Mr Ding, 34, financed his lavish lifestyle with money fleeced from investors, the South China Morning Post reported on Monday.
It said Ezubao was launched in July 2014 and embarked on a massive advertising campaign to raise funds.
On the surface, it was a P2P website with various projects, offering investors annual returns ranging between 9 per cent and 14.6 per cent. But in reality, the website's operators made up most of the projects listed on its website and used funds from new investors to pay old debts, Xinhua reported.
Chinese police said they had sealed, frozen and seized the assets of Ezubao and its linked companies.
The Ezubao case underscores the risks created by China's fast-growing US$2.6-trillion wealth management product industry, said Reuters. Many products are sold through loosely regulated channels, including online financial investment platforms and privately run exchanges.
Wednesday 24 February 2016
Investors cry foul over tree investments gone wrong
Investors cry foul over tree investments gone wrong http://str.sg/ZyoY
Source: The Straits Times, published 25 Feb 2016
About 70 investors, including Singaporeans and foreigners working here, are crying foul over a scheme that effectively promised that their money could grow on trees.
In 2013, the investors poured sums ranging from $5,000 to $60,000 into a scheme to grow aquilaria trees - a prized tree that is harvested for valuable agarwood or oud oil, used in perfumes and spas.
The investors, who were approached via telemarketing, complain that the firm they gave their money to - Singapore-based Tropical Forestry Venture (TFV) - has folded. It vacated its office at Sago Street more than a year ago.
And so far, they have had no luck pursuing their grievances with the authorities here.
Under the scheme, an investor paid about $230 per sapling or $550 per semi-mature tree. In return, he could expect potential returns of three to seven times when the saplings matured in six to seven years.
For semi-mature trees, the timespan was shorter.
The sales agreements typically state that there is a guaranteed return of $400 to $600 for every tola of agarwood oil harvested. A tola is an old Indian unit of weight, and is 11.66g.
Each tree could potentially yield at least four tolas. The harvesting cost and sales commission added up to 13 to 15 per cent of the sales proceeds.
Depending on the firm, the tree plantations could be in Kelantan in Malaysia or Kanchanaburi in Thailand.
Further complicating the investors' woes is their claim that another firm, Tropical Forestry Assets Management (TFAM), had asked them for cash top-ups to maintain or upgrade their trees before they could be harvested for profits.
When contacted, Mr Ben Soo, founder and managing director of TFAM, said the claims that his firm collected payments related to TFV's past sales were "untrue".
He said he has informed TFV's customers that the payments are for fresh batches of agarwood trees.
Mr Soo said TFAM was in no way related to TFV.
Several of the affected investors have made police reports against the two firms over the past 12 months.
When contacted, the police said it is inappropriate to comment on police investigations, if any.
Retiree Eugene Kwong, 53, told The Straits Times that he paid TFV for 150 saplings at $230 each in November 2013 and 25 semi-mature trees at $550 apiece in January 2014, which worked out to a total of $48,250. He was given an additional 15 trees for free.
Mr Kwong received a certificate of ownership from TFV for his saplings but not for the semi-mature trees.
He alleged that in May last year, he was notified by TFAM that TFV had folded and TFAM had taken over the marketing responsibility for the trees. However, TFAM had no marketing rights for TFV's customers, he claimed.
Subsequently, he bought 50 two-year old trees at $100 apiece from TFAM to try to recoup his investment. These trees will mature in about four years' time. Mr Kwong has filed a police report against TFV.
A 33-year-old investor, who declined to be named, said she bought two batches of 25 semi-mature trees each from TFV in September 2013. Each batch cost $5,250 - $210 per tree - and she paid for the first batch. She was given four trees for free. She said TFV told her at the time that September 2015 was the earliest that she could profit from her trees - and that did not happen.
She alleged that she was informed by TFAM at the end of 2014 that it was taking over the customer accounts from TFV which had ceased operations, and that she could continue her agarwood investments with TFAM. She later paid $7,950 ($310 per tree and $200 to upgrade two free trees) to TFAM in January last year, which she believed was balance payment of her transaction with TFV.
She later found out that TFAM did not consider her payment to be the balance payment of her agreement with TFV, but as payment for a new batch of trees with TFAM.
"I'm very frustrated. I hope TFAM will refund me as it has given the impression that it took over TFV's business," said the investor, who has filed a police report against TFV and TFAM.
The Consumers Association of Singapore said it has received nine complaints against TFV but the complainants were mainly counselled or rejected as the association does not handle such investment cases.
It also received a query relating to another agarwood firm, Asia Plantation Singapore - which is currently on the alert list of the Monetary Authority of Singapore - involving agarwood investments, said the consumer watchdog.
Source: The Straits Times, published 25 Feb 2016
About 70 investors, including Singaporeans and foreigners working here, are crying foul over a scheme that effectively promised that their money could grow on trees.
In 2013, the investors poured sums ranging from $5,000 to $60,000 into a scheme to grow aquilaria trees - a prized tree that is harvested for valuable agarwood or oud oil, used in perfumes and spas.
The investors, who were approached via telemarketing, complain that the firm they gave their money to - Singapore-based Tropical Forestry Venture (TFV) - has folded. It vacated its office at Sago Street more than a year ago.
And so far, they have had no luck pursuing their grievances with the authorities here.
Under the scheme, an investor paid about $230 per sapling or $550 per semi-mature tree. In return, he could expect potential returns of three to seven times when the saplings matured in six to seven years.
For semi-mature trees, the timespan was shorter.
The sales agreements typically state that there is a guaranteed return of $400 to $600 for every tola of agarwood oil harvested. A tola is an old Indian unit of weight, and is 11.66g.
Each tree could potentially yield at least four tolas. The harvesting cost and sales commission added up to 13 to 15 per cent of the sales proceeds.
Depending on the firm, the tree plantations could be in Kelantan in Malaysia or Kanchanaburi in Thailand.
Further complicating the investors' woes is their claim that another firm, Tropical Forestry Assets Management (TFAM), had asked them for cash top-ups to maintain or upgrade their trees before they could be harvested for profits.
When contacted, Mr Ben Soo, founder and managing director of TFAM, said the claims that his firm collected payments related to TFV's past sales were "untrue".
He said he has informed TFV's customers that the payments are for fresh batches of agarwood trees.
Mr Soo said TFAM was in no way related to TFV.
Several of the affected investors have made police reports against the two firms over the past 12 months.
When contacted, the police said it is inappropriate to comment on police investigations, if any.
Retiree Eugene Kwong, 53, told The Straits Times that he paid TFV for 150 saplings at $230 each in November 2013 and 25 semi-mature trees at $550 apiece in January 2014, which worked out to a total of $48,250. He was given an additional 15 trees for free.
Mr Kwong received a certificate of ownership from TFV for his saplings but not for the semi-mature trees.
He alleged that in May last year, he was notified by TFAM that TFV had folded and TFAM had taken over the marketing responsibility for the trees. However, TFAM had no marketing rights for TFV's customers, he claimed.
Subsequently, he bought 50 two-year old trees at $100 apiece from TFAM to try to recoup his investment. These trees will mature in about four years' time. Mr Kwong has filed a police report against TFV.
A 33-year-old investor, who declined to be named, said she bought two batches of 25 semi-mature trees each from TFV in September 2013. Each batch cost $5,250 - $210 per tree - and she paid for the first batch. She was given four trees for free. She said TFV told her at the time that September 2015 was the earliest that she could profit from her trees - and that did not happen.
She alleged that she was informed by TFAM at the end of 2014 that it was taking over the customer accounts from TFV which had ceased operations, and that she could continue her agarwood investments with TFAM. She later paid $7,950 ($310 per tree and $200 to upgrade two free trees) to TFAM in January last year, which she believed was balance payment of her transaction with TFV.
She later found out that TFAM did not consider her payment to be the balance payment of her agreement with TFV, but as payment for a new batch of trees with TFAM.
"I'm very frustrated. I hope TFAM will refund me as it has given the impression that it took over TFV's business," said the investor, who has filed a police report against TFV and TFAM.
The Consumers Association of Singapore said it has received nine complaints against TFV but the complainants were mainly counselled or rejected as the association does not handle such investment cases.
It also received a query relating to another agarwood firm, Asia Plantation Singapore - which is currently on the alert list of the Monetary Authority of Singapore - involving agarwood investments, said the consumer watchdog.
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