With some much recent news about Ponzi schemes - see the posts on Bernard Madoff and about the Sunshine Empire, the question that some ask is "who was Ponzi and what was his scheme?'
Ponzi was someone with a bright idea which he introduced in the USA as a means of generating great returns. His idea involved international reply coupons which could be bought in any country and used like postage stamps to send a letter overseas. These coupons could also be exchanged for cash in any other country. His brainwave was to buy the coupons in less developed countries and then to ship them to the USA where they could be exchanged for much greater amounts (sounds like a great form of arbitrage). Logistic problems prevented his plan from being carried out but he received such a large amount of investments in his plan that he decided to carry out a massisve deception by using new investment money to pay off previous investments.
If you wish to know more about his life and his ultimate fate, you may refer to wikipedia.
Showing posts with label Ponzi scheme. Show all posts
Showing posts with label Ponzi scheme. Show all posts
Wednesday, October 7, 2009
Tuesday, October 6, 2009
Sunshine Empire 3 - The law of Ponzi Schemes
If James Phang and company are found to have run a Ponzi scheme, what can they be charged with?
Under Singapore law, the law relating to Ponzi Schemes can be found under section 340 of the Companies Act which refers to the business of a company "being carried on with intent to defraud creditors or ... for any fraudulent purpose" . Phang and Jackie Hoo face 1 charge under this section.
Another relevant section is section 404, Companies Act which refers to fraudulent inducing persons to invest money. However, proving fraud is usually rather difficult and it usually requires proof as to the state of the defendant's mind - that he intended to defraud others. In some cases, the defendant might claim that he honestly believed in his company's business model (its revenue generation methods). In a crminal trial, the prosecution has to prove the charges beyond reasonable doubt.
It should be noted that the bulk of the charges against the Phang gang are in relation to falsification of accounts. This may require a lot of investigation work but may in the end be easier to prove. In many cases, the assets of the company are overstated. In the cases of fraud, it is often not just over optimistic valuations of the assets but rather including ficititious assets on the balance sheets.
Under Singapore law, the law relating to Ponzi Schemes can be found under section 340 of the Companies Act which refers to the business of a company "being carried on with intent to defraud creditors or ... for any fraudulent purpose" . Phang and Jackie Hoo face 1 charge under this section.
Another relevant section is section 404, Companies Act which refers to fraudulent inducing persons to invest money. However, proving fraud is usually rather difficult and it usually requires proof as to the state of the defendant's mind - that he intended to defraud others. In some cases, the defendant might claim that he honestly believed in his company's business model (its revenue generation methods). In a crminal trial, the prosecution has to prove the charges beyond reasonable doubt.
It should be noted that the bulk of the charges against the Phang gang are in relation to falsification of accounts. This may require a lot of investigation work but may in the end be easier to prove. In many cases, the assets of the company are overstated. In the cases of fraud, it is often not just over optimistic valuations of the assets but rather including ficititious assets on the balance sheets.
Monday, October 5, 2009
Sunshine Empire 2 - the charges
From the Commercial Affairs Department website - as at 5 October 2009
Q What is the status of the investigation?
A CAD has completed the investigations on Sunshine Empire Pte Ltd ("Sunshine Empire") and other companies involved in this case. On 3 February 2009, the following persons have been charged in the Subordinate Court.
a. Jackie Hoo Choon Cheat, a director of Sunshine Empire, and James Phang Wah each faced 1 charge of fraudulent trading under Section 340 of the Companies Act, 1 charge of failure to maintain proper accounting records of Sunshine Empire under Section 199 of the Companies Act and 8 charges of criminal breach of trust as an agent of Sunshine Empire under Section 409 of the Penal Code;
b. James Phang Wah also faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Communications Technology Pte Ltd under Section 401 (2A) (b) of the Companies Act. In addition to the Penal Code and Companies Act charges, James Phang Wah faced 3 charges for possession of uncensored and obscene films under the Films Act;
c. Neo Kuon Huay, a director of Empire Emall (S) Pte Ltd, faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Emall (S) Pte Ltd under Section 401 (2A) (b) of the Companies Act; and
d. Yong Wai Hong, a director of Empire Communications Technology Pte Ltd and various companies, faced 6 charges of false declaration of the share capital of various companies under Section 401 (2A) (b) of the Companies Act.
Note that Yong Wai Hong has already been convicted of the charges under the Companies Act.
Q What is the status of the investigation?
A CAD has completed the investigations on Sunshine Empire Pte Ltd ("Sunshine Empire") and other companies involved in this case. On 3 February 2009, the following persons have been charged in the Subordinate Court.
a. Jackie Hoo Choon Cheat, a director of Sunshine Empire, and James Phang Wah each faced 1 charge of fraudulent trading under Section 340 of the Companies Act, 1 charge of failure to maintain proper accounting records of Sunshine Empire under Section 199 of the Companies Act and 8 charges of criminal breach of trust as an agent of Sunshine Empire under Section 409 of the Penal Code;
b. James Phang Wah also faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Communications Technology Pte Ltd under Section 401 (2A) (b) of the Companies Act. In addition to the Penal Code and Companies Act charges, James Phang Wah faced 3 charges for possession of uncensored and obscene films under the Films Act;
c. Neo Kuon Huay, a director of Empire Emall (S) Pte Ltd, faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Emall (S) Pte Ltd under Section 401 (2A) (b) of the Companies Act; and
d. Yong Wai Hong, a director of Empire Communications Technology Pte Ltd and various companies, faced 6 charges of false declaration of the share capital of various companies under Section 401 (2A) (b) of the Companies Act.
Note that Yong Wai Hong has already been convicted of the charges under the Companies Act.
Sunshine Empire trial
The trial of the bosses of the Sunshine Empire has just started. James Phang, his wife Neo Kuon Huay, and ex-direcror Jackie Hoo Choon Cheat have been charged with their roles in this affair.
The prosecution has alleged that they masterminded what is Singapore's largest Ponzi scheme involving more than $180 million. Ponzi schemes are a scam where monies from new investors is used to pay off previous investors, thus giving the appearance of a successful business model.In this way, more investments are attracted.
Ponzi schemes have been in the news in the last 12 months because of the enormous scam run by American Bernie Madoff. Please search this blog if you want more information on some of Madoff's tactics.
The prosecution has alleged that they masterminded what is Singapore's largest Ponzi scheme involving more than $180 million. Ponzi schemes are a scam where monies from new investors is used to pay off previous investors, thus giving the appearance of a successful business model.In this way, more investments are attracted.
Ponzi schemes have been in the news in the last 12 months because of the enormous scam run by American Bernie Madoff. Please search this blog if you want more information on some of Madoff's tactics.
Monday, March 23, 2009
Ponzi scheme in Singapore, Singapore's own Madoff?
The recent case of Public Prosecutor v Stefanovic Nenad shows the results of a local Ponzi scheme. As most people know, a Ponzi scheme relies on using new investors's money to pay off previous investors, thus giving the previous investors the ILLUSION that the business is doing well.
Nenad, a Singapore resident Yugoslav, tooks monies from various persons in Singapore, telling them that he could obtain 30% returns from them using a trading account he had with a company called FIMAT Singapore Pte Ltd. The amounts of money involved were over $800,000. In some of the cases, he used new investors' monies to pay off previous investors who were persuaded to invest the money with him. In other cases, he took money from investors, telling them that he was going to use his FIMAT trading account even after this account was closed.
He was charged with 11 charges, out of which the prosecution proceeded with only 4 charges. He pleaded guilty and was sentenced to 64 months' imprisonment. The judge took into consideration the fact that a large sum of money was involved, the public interest in stopping financial fraud and the fact that he had used his illegal methods over a period of time (over a period of 2 years).
The charges against him included cheating, forgery and criminal breach of trust.
Those who wish to read the full judgment of the court may wish to refer to the Subordinate Courts website - www.subcourts.gov.sg.The case is found (for the time being at least) at http://lwb.lawnet.com.sg/legal/lgl/rss/subcourts/60844.html.
Nenad, a Singapore resident Yugoslav, tooks monies from various persons in Singapore, telling them that he could obtain 30% returns from them using a trading account he had with a company called FIMAT Singapore Pte Ltd. The amounts of money involved were over $800,000. In some of the cases, he used new investors' monies to pay off previous investors who were persuaded to invest the money with him. In other cases, he took money from investors, telling them that he was going to use his FIMAT trading account even after this account was closed.
He was charged with 11 charges, out of which the prosecution proceeded with only 4 charges. He pleaded guilty and was sentenced to 64 months' imprisonment. The judge took into consideration the fact that a large sum of money was involved, the public interest in stopping financial fraud and the fact that he had used his illegal methods over a period of time (over a period of 2 years).
The charges against him included cheating, forgery and criminal breach of trust.
Those who wish to read the full judgment of the court may wish to refer to the Subordinate Courts website - www.subcourts.gov.sg.The case is found (for the time being at least) at http://lwb.lawnet.com.sg/legal/lgl/rss/subcourts/60844.html.
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