Time to get tough with Ponzi schemes

Time to get tough with Ponzi schemes

Justice Ministry officials are seen inspecting a 24.8-million-baht Lamborghini Huracan, one of the assets seized last year from Apirak Kothi, co-founder of the Forex-3D Ponzi scheme. (Photo: Pattarapong Chatpattarasill)
Justice Ministry officials are seen inspecting a 24.8-million-baht Lamborghini Huracan, one of the assets seized last year from Apirak Kothi, co-founder of the Forex-3D Ponzi scheme. (Photo: Pattarapong Chatpattarasill)

The Forex-3D fraud with its many victims is just one of a plethora of financial scams in the country. Now that an investigation is underway, a number of socialites, including some well-known entertainers who are allegedly linked to the high-profile scam, have been charged with collusion or even imprisoned.

The Forex-3D scheme was operated like a chit fund or Ponzi scheme, with some new tactics to make it look more promising. It was largely based on attractive investment schemes involving the stock exchange and foreign currency trading as well as digital currency investments.

The Forex-3D operators lured investors with get-rich-quick mindsets who wanted to make profits from foreign currency exchange through forex-3D.com. The number of victims exceeded 8,400, while total losses came to more than two billion baht. The gang is said to have used the same well-planned tactic to entice many victims. They set up fake companies as a front and enlisted a number of wealthy socialites to present the scheme while spending a great deal of money to raise their business profile and entice more people into the bogus trading. Initial profits from the lucrative trade were paid as returns to existing investors. This made it difficult to trace and retrieve the lost money. The scam can be classified as money laundering in accordance with the Anti-Money Laundering Act 1999.

It should be noted that the law regulating the operation of chit funds is not sufficient. The Act against Fraudulent Loans 1987, which has been in use for over three decades, is outdated. The Anti-Money Laundering Act 1999 designates police officers as its officially authorised law enforcers.

These laws are not enough to handle scams with huge numbers of victims and large amounts of stolen money. Now, chit funds with massive liabilities and many victims are handled by the Department of Special Investigation (DSI) under the Ministry of Justice. The DSI has been empowered to freeze assets and confiscate money from scammers.

It also needs to be mentioned that some state agencies and regulatory bodies, ie, the Bank of Thailand (BoT), the Securities and Exchange Commission (SEC), the Fiscal Policy Office, and the Consumer Protection Council, are quite useless because they have no legal authority. Even worse, filing cases with unauthorised agencies merely adds to the burden of the victims, while it could mean a delay in the investigation process. Such delays are disadvantageous as scammers would then have enough time to escape or transfer stolen money outside the country.

In reality, it's almost impossible to get rid of fraudulent chit-fund schemes because the current system requires complaints and evidence from damaged parties. Without both, the authorities cannot take any action. Legal loopholes such as light and disproportionate penalties make it hard to deter would-be scammers from committing wrongdoing. Take, for example, the case of Chamoy Thipyaso, a major chit fund operator who was convicted of corporate fraud in the 1980s. She was handed accumulated prison sentences surpassing 100,000 years but, in practice, her actual prison sentence under the law was limited to a maximum of 20 years. After serving only seven years and 11 months in jail, the woman walked free.

With such light penalties, some scammers who have done their time may be tempted to transgress again. Some victims become swindlers themselves in the hope of reclaiming their lost money.

More importantly, not all the victims are innocent investors. In fact, quite a few are people with a middle-class background who want to make some easy money. These individuals should be well aware of the risk accompanying any unusually lucrative investment but they still often get involved in these schemes in pursuit of a quick profit.

Chit fund fraud is a major economic crime that causes enormous damage to society and the economic system, including severe problems like toxic debt and bankruptcy. Despite arrests, there are copy-cats who aim to make ill-gotten gains at the expense of others.

Suppression of this financial crime is not enough. The authorities must focus on prevention.

To begin with, all agencies concerned must adopt proactive measures with a view to deterrence rather than suppression. Commercial banks must give full cooperation by reporting every dubious transaction to anti-money-laundering authorities.

In addition, the SEC should do more to regulate the market. It must stringently monitor ads and investment platforms on social media, especially those without licences. There are more than a few illegal platforms in the system.

Besides, the authorities must try to streamline the system, with one organisation assigned as a core agency to accept complaints and forward them to relevant authorities. This is to ensure a swift and efficient investigation process given the new fraudulent tactics employed by swindlers. Streamlining is needed to better accommodate the victims, who would otherwise have to contact too many agencies in seeking justice.

The authorities also need to stiffen the penalties. It's time to review the efficiency and effectiveness of relevant laws, particularly the 40-year-old Act on Fraudulent Loans.

Finally, the state must do more to equip the public with knowledge about the investment industry to ensure they have the financial literacy to make better decisions, rather than leaving them floundering in the deep end at the mercy of the sharks.


Chanisara Dumkum is a researcher at the Thailand Development Research Institute. Policy analyses from the Thailand Development Research Institute (TDRI) appear in the Bangkok Post on alternate Wednesdays.



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