GFDI's investment seminars before the collapse attracted a large number of customers to attend - Photo: GFDI fanpage
The familiar model of “borrowing from later and paying back earlier” applied by some small businesses to appropriate thousands of billions of dong from victims once again raises legal issues as well as lessons for the people when GFDI is not the first and also not the last business to trap victims with the “bait” of high interest rates.
Old bait, new victim
Speaking with Tuoi Tre , Mr. Huynh Hoang Phuong, asset management consultant of FIDT (specializing in investment and asset management), said that only credit institutions are allowed to mobilize deposits from residents.
Meanwhile, in addition to bonds, stocks and credit channels, enterprises often mobilize capital through other methods such as investment cooperation, borrowing from individuals and organizations, etc.
Regarding the GFDI case, Mr. Phuong said that this company showed signs of operating according to a multi-level Ponzi scheme (taking money from later investors to pay interest to earlier investors). This Ponzi scheme has appeared in many developed countries and was introduced to Vietnam many years ago.
"Therefore, management agencies need to strengthen inspections and promptly detect violations," said Mr. Phuong.
Explaining why GFDI can easily raise several thousand billion VND without being "whistled", lawyer Truong Thanh Duc, director of ANVI Law Firm, said that enterprises are allowed to freely raise capital in many different forms such as selling shares and bonds; receiving capital contributions for business cooperation; borrowing money from credit institutions, individuals, and domestic and foreign enterprises.
And if capital is raised for real investment in production and business, without fraud, deception or intentional appropriation, failure to pay principal and interest due to loss or failure is not considered a violation of the law.
At that time, the enterprise is allowed or forced to go bankrupt to liquidate assets and release debt obligations. Owners, creditors, investors, customers… can all lose both capital and interest.
However, in the case of GFDI, the police have reviewed and collected information and documents related to this enterprise's illegal capital mobilization and financial fraud.
“Not only the GFDI case, over the past decades, capital mobilization by many enterprises has had elements of fraud and deception about many things, from capacity, projects, efficiency, capital usage purposes to embezzlement and appropriation,” said Mr. Duc.
According to Mr. Duc, raising capital with the promise of paying interest many times higher than bank deposit interest rates is an old method but still deceives many victims.
“Sky-high interest rates have always been a lure that can destroy almost any prey. In too many cases, with just the bait of attractive interest rates, criminals have in a short time raked in and appropriated thousands of billions from victims,” Mr. Duc emphasized.
Are unusually high interest rates a sign of a scam?
According to Associate Professor Dr. Tran Viet Dung - Director of the Institute of Banking Science Research (Banking Academy), only banks are allowed to receive deposits from individuals and pay interest on deposits. Meanwhile, through the form of asset loan contracts, some enterprises, including GFDI, can mobilize large amounts of money from people with agreed interest rates.
“A property loan contract is an agreement between the parties. Accordingly, the lender delivers the property to the borrower. When the repayment period comes, the borrower must return to the lender the same type of property in the correct quantity and quality and only has to pay interest if there is an agreement or if the law so stipulates,” Mr. Dung cited the provisions of the Civil Code.
According to Article 468 of the 2015 Civil Code, loan interest rates must not exceed 20% per year unless otherwise provided by law.
However, according to Mr. Dung, in order to not exceed the controlled interest rate, many subjects have found ways to "circumvent" the law. For example, GFDI always includes interest in the principal... in the asset loan contract with the people. This will make it difficult to control companies that offer "unbelievable" interest rates.
According to Mr. Dung, there may be legal gaps, but they mainly exploit the greed and lack of financial understanding of a segment of the population.
When receiving an invitation to raise capital with an interest rate of nearly 50%, the first thing to ask is where this profit really comes from? Because it is very difficult to create an interest rate of 50% if only doing normal business.
Mr. Dang Tran Phuc, Chairman of the Board of Directors of AzFin Vietnam Joint Stock Company, also said that if a business can pay high interest rates regularly, it means creating a very good profit level.
“With a good business plan and healthy finances, businesses can borrow from banks at a cost of just over 10% – much lower than the amount they have to spend to borrow from people,” Mr. Phuc pointed out the unusual point.
Therefore, the offer of interest rates above 30% is unusual, because no business can regularly generate this profit to pay interest.
“Even the most efficient corporations in Vietnam have a return on equity of 25%. With this profit level, businesses can easily access capital from banks or through the stock market, without needing to mobilize small amounts with high interest rates,” said Mr. Phuc.
Overview of the GFDI case
– GFDI Investment Consulting One Member Co., Ltd. was established by Mr. Nguyen Quang Hoang in 2018 in Da Nang with initial capital of 1 billion VND.
– In 2022, GFDI will increase its capital to 80 billion VND and expand to many other industries, in addition to its main industry of investment consulting.
– GFDI mobilizes investment capital from people with high interest rates in the form of “asset loan contracts” for a long period of time.
– From November 2023, the business investment suffered losses and financial insolvency. Therefore, Mr. Nguyen Quang Hoang organized and directed employees to defraud and appropriate customers' assets in the form of signing loan contracts, using the money borrowed from the latter to pay the former.
– By early November 2024, GFDI lost its ability to pay 7,541 customers with a total outstanding principal of more than VND 3,700 billion.
– At noon on November 8, the Investigation Police Agency of Da Nang City Police simultaneously searched the headquarters and transaction office of GFDI.
Due to lack of investment channels?
According to Mr. Huynh Hoang Phuong, in addition to the reasons of lack of knowledge and greed leading to being deceived, the root cause of multi-level capital mobilization cases in recent times is also due to Vietnam's lack of investment channels.
Vietnam is in the development stage, many people have accumulated assets while deposit interest rates have reached a record low in the past 2 years.
“When bank interest rates fall below 5% per year, real estate prices increase too quickly to invest in, while not everyone has enough knowledge to participate in stocks. This environment is quite favorable for fraudulent multi-level groups to raise capital,” Mr. Phuong commented, adding that it is necessary to propagate to improve people’s financial knowledge, while diversifying investment channels to prevent Ponzi schemes.
Saving still has positive real interest
According to statistics from AzFin Vietnam, from 2000 to now, stock investment funds have an average yield of 10.5%/year. While savings are about 9% (there was a period when deposit interest rates were over 10%/year, but in the last 2 years they have dropped to a record low of around 5%).
During the same period, investing in gold can yield up to about 13.2%/year (due to strong fluctuations in the last 2 years).
“Depositing in a bank at 5% interest per year compared to inflation still has a positive real interest rate. Therefore, if you have not found a suitable investment channel and are not confident in your level of understanding, people can consider saving,” Mr. Dang Tran Phuc, Chairman of the Board of Directors of AzFin Vietnam Joint Stock Company, recommended.
For those who want to invest, contribute capital or lend to businesses, according to Mr. Phuc, people should carefully study the business activities of the business based on self-prepared or audited financial reports within a period of 3-5 years.
“A business cannot record “fake” high profits for many years because it has to pay taxes,” Mr. Phuc recommended.
Source: https://tuoitre.vn/bay-nan-nhan-voi-mieng-moi-lai-suat-cao-20241115222924776.htm
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