According to a Xinhuanet report, the Securities
Commission of Malaysia shut down a newly launched website set up by
Swiss Mutual Fund (SMF) on September 15, charging that it was
engaged in illegal fundraising activities.
On the same day,?tens of thousands?of Chinese SMF
investors' desperate hopes for the reopening of SMF's website ended
when they finally realized that the fund was a con scheme and that
their money was gone forever. They began reporting the fraud to the
authorities. Now, the State Administration for Commerce and
Industry and the Ministry of Public Security are currently
investigating the case.
As early as this May, a Chinese surnamed Dong in Tai'an of east
China's Shandong Province reported to the local industry and
commerce administration that Wei Lixin, a sales agent, had
persuaded him to buy into SMF. But Wei had disappeared and Dong
could not cash in his funds.
Talking with Dong, government officials found out that SMF
promised a 300 percent return, a rate too good to be true.
According to Dong, Wei coaxed him into investing 8,000 yuan
(US$1065)?into the fund by pledging a gain of 400,000 yuan
(US$ 53,266) in 30 months. If Dong persuaded others to buy into the
fund, he would get a 10 percent cut from each one's investment, Wei
had promised.
A special team was formed to investigate the case. They found
out that SMF was not registered with the China Securities
Regulatory Commission, or the Ministry of Civil Affairs, or the
People's Bank of China. Thus the fund was an illegal, underground
scam. Analyzing how the fund worked, the team concluded that SMF
was a pyramid scheme by nature that operated online in the disguise
of an international fund. SMF's strategy was to defraud investors
out of money by promising high returns.
On June 10, the police in Tai'an took Wei Lixin and her
accomplice, Chen Yong, into custody. Afterwards, considerable
evidence was produced, pointing out their unlawful activities in
running the fake fund.
According to the People's Daily story, Wei and Chen
confessed that SMF attracted at least 170,000 investors in China,
and cajoled no less than 1.3 billion yuan (US$173 million) out of
these people. The story also viewed the case as the biggest online
pyramid scheme to date in terms of the quantities of people and
money involved.?
SMF was introduced to China early this year. The "fund" rapidly
garnered fame for its high rate of return – 300 percent and
established a large number of believers. Relatives or friends who
guaranteed the profitability and vowed to take any responsibility
often brought in new investors in the fund. This made the bogus
fund appear very real to other investors.
After buying SMF, an account along with a password would be
given to each investor. He or she could log onto SMF's official
website to check losses and gains of the non-existent fund. Before
the website was closed on August 18, it had more than 200,000 views
per day. Actually, investors could get returns – not from so-called
SMF turnover – but from the new investors' money. Greedy, they
immediately bought more funds. Significantly, the investors could
not make any deal through their online accounts at the SMF
website.
In fact, the SMF has already been identified as fraudulent in
other countries and regions. On April 19, 2007, Malaysia's
Securities Commission and banks warned Malaysian investors against
SMF. They also advised those who fell into the trap to report the
fraud. Moreover, the Swiss Embassy and consulates in Malaysia and
Singapore stated that it was illegal for SMF to use "Swiss" in its
trademark: the fund was not registered in Switzerland. Earlier
Malaysia's biggest bank, Maybank, upon discovering that SMF had
used "MayBank2U.com" as a trademark in its brochures, announced
that the bank had no business relations whatsoever with SMF. The
Securities and Futures Commission of Hong Kong issued a notice on
its website this June, saying that the SMF's website was fraudulent
and also warned investors of four SMF-related websites.
Additionally, before Chinese authorities actually intervened in
the SMF case, some IT professionals discovered that the SMF's
website was a virtual host: this was very abnormal, seeing that the
fund had claimed a 60-year history. They also discovered that SMF
had transferred money not directly through bank accounts but via an
intermediary service, or network payment system (NPS). In other
words, SMF did not dare to use bank services like other normal
funds.
(China.org.cn by Pang Li, September 27, 2007)
