Becoming billionaires through scams

It is estimated by financial and insurance companies that fraud costs the global economy over US$ 5trillion annually! Yes, you have read it right – five trillion dollars! So, why work hard in a hot and humid factory when you can make that kind of money sitting in a cool office room while sipping coffee? But, history tells us that fraudsters could hardly enjoy the money they earned by defrauding innocent people. Jail was the ultimate destination of history’s best con men.     

Let us hear about fraudster Charles Ponzi, from whom the infamous term Ponzi Scheme was coined. Let us see what history books tell us about him.    

Charles Ponzi and the Ponzi Scheme – 1920 – Total Scammed US$20 Million.

“Ponzi from Parma, Italy arrived in Boston in 1903 without a cent to his name. He was responsible for one of the most renowned, yet simple frauds in history – the Ponzi Scheme, also known as the Pyramid Scheme. The scheme recruits investors with a promise of payments or services from enrolling into the scheme. The investing scam promises high rates of return with minimal risk to investors. The Ponzi scheme achieves returns for the early investors via the acquisition of new investors, who will essentially pay the early investors. As the number of new investors reduces, so does the amount of money to pay the previous investors. This is when the scheme becomes unsustainable and fizzles out, leaving the latest investors with no return.

Ponzi was arrested and charged with 86 counts of fraud and sentenced to 14 years imprisonment. He died penniless.”

When we look around, we find many Ponzis in this country, ready with many schemes to swindle people. They are just waiting for the right moment to strike.   

Apparently, Bangladesh has become a fertile land for becoming a millionaire overnight through partaking in various kinds of dubious money-making scams, just like the Ponzi Scheme. And the number of such “clever businessmen” is increasing day by day who “honestly” believe in “working hard” to rip off their unsuspecting clients to become owners of billions of takas.

The Hallmark loan scandal is one of the biggest individual loan frauds in Bangladesh that came to light in 2010. Record books say the Hallmark-Sonali Bank Loan Scam was a scam pulled off by the largest State Owned Commercial Bank (SOCB) of Bangladesh, Sonali Bank by giving a loan of BD Taka 3400 crore (almost US$454 million) using fabricated documents between 2010 and 2012. The loan scam occurred when one branch of Sonali Bank illegally gave out $454 million in loans, including nearly $344 million to Hallmark Group, supposedly involved in the textile business. Tanvir Mahmud, Hallmark›s managing director, connived with a branch manager to issue fraudulent letters of credit to fictitious companies. The MD is in jail now.

Another massive scam that stirred public attention was the Destiny Group’s involvement in embezzlement of around Tk 40 billion (Tk 4000 crore). They collected this money from the people over a decade in the name of Multi-Level Marketing (MLM).

It has been eight years since their scam was exposed in 2012, but none of the clients have been repaid.

According to Destiny’s own records, they have around 4.5 million clients, including customers, distributors and investors.

Destiny also faces two cases of money laundering, neither of which has been settled. The masterminds are in jail at the moment.  

Reports say that thousands of crores of takas were looted from some banks in the name of loans over the last several years.

  The Basic Bank scam got exposed in 2015 when it was revealed that the Anti-Corruption Commission filed 56 cases against 156 people over the embezzlement of Tk. 20 billion.  Bangladesh Bank estimated Tk.45 billion has been swindled from the bank over a period of six years.

Now, it’s time to talk about the notorious Bangladesh Bank online robbery, also known as the Bangladesh Bank cyber heist  that took place in February 2016. What really happened? “Thirty-five fraudulent instructions were issued by security hackers via the SWIFT network to illegally transfer close to US$1 billion from the Federal Reserve Bank of New York account belonging to Bangladesh Bank, the central bank of Bangladesh. Five of the thirty-five fraudulent instructions were successful in transferring US$101 million, with US$20 million traced to Sri Lanka and US$81 million to the Philippines. The Federal Reserve Bank of New York blocked the remaining thirty transactions, amounting to

US$850 million, due to suspicions raised by a misspelled instruction. All the money transferred to Sri Lanka has since been recovered. However, as of 2018 only around US$18 million of the US$81 million transferred to the Philippines has been recovered. Most of the money transferred to the Philippines went to four personal accounts, held by individuals, and not to companies or corporations.

At the end of June this year, the amount of NPLs in the banking sector stood at Tk 96,116.65 crore. Of the total, state-run Sonali, Janata, BASIC bank and private commercial Padma Bank’s NPLs amounted to Tk35,478.35 crore, or 37 per cent of the entire stressed loans in the banking sector, according to data of the Bangladesh Bank(BB).

It is also reported that Janata Bank has the highest defaulted loans in the country’s banking sector, with its NPLs standing at Tk14,005.79 crore till June this year, which was 26.76 per cent of the total outstanding loans of the bank.  

The Bangladesh Bank’s investigations found massive irregularities in the Farmers Bank’s loan disbursement. Some borrowers plundered more than Tk3,500 crore from the bank.

The incidences of swindling by e-commerce companies are taking the lead in media headlines. The names that have hit the headlines are E-orange, Evaly and Dhamaka. Hundreds of investors are now on the streets lamenting their fate as they have lost their entire business capital.  

The question that comes to our mind is why no regulatory body stopped these companies when their liabilities started to go higher than their paid-up capital? Why is there no mechanism to detect the shady activities of the fraudsters long before they can swindle hundreds of citizens to the tune of thousands of crores of takas?

The writer is a business analyst