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Villagers wait outside the Ministry of Interior in late February to seek intervention against the firm Empire Big Capital. Pha Lina

Suits filed over ponzi schemes

Nearly 7,500 Cambodians who have fallen victim to ponzi schemes have come forward to file class-action lawsuits against three companies that allegedly cheated them out of nearly $60 million, officials said yesterday, estimating that the companies may have defrauded as many 50,000 victims to the tune of $400 million.

Speaking yesterday during a press conference held by the ministries of interior, justice and finance, the government identified the three now-defunct companies facing legal action as Asean Instrument Foundation (AIF), Investment Consultant Association (ICA) and Empire Big Capital (EBC).

Ngy Chanphal, secretary of state at the Ministry of Interior, claimed the victims were defrauded by these financial firms, whose staff urged clients to deposit money directly with the companies with the promise they would receive high investment returns. The firms absconded after collecting the cash over an 18-month period, he said, adding that on average each victim lost $8,000.

“The lost amount is huge as it is hundreds of millions of dollars,” he said, adding that relevant authorities would take legal action to prevent similar incidents from occurring.

“This is a sensitive issue that hurts society and this economic subversion occurred because there is a lot of cash flowing in and out [of the country] that we cannot control,” he added.

Chanphal declined to disclose the amount each firm was being sued. However, he identified four individuals accused of fraud as EBC President Tan Tze Chin, a Malaysian who operated under the false identity of Sean Tan; AIF President Huot Sovann; ICA President Chi Gosaly; and EBC Marketing Manager Long Sambath.

None of the four have been apprehended by police. If arrested, Chanphal said, the government would work with all concerned authorities to ensure that the money is returned to their victims.

To prevent future victims of dubious business ventures, Chanphal urged people to be wary of businessmen who host workshops at five-star hotels, pose with luxury cars and publicise images of themselves with high-ranking and powerful Cambodian individuals.

Ngoun Sokha, secretary of state at the Ministry of Economy and Finance, said the three financial firms attracted investors with bogus claims of annual returns of up to 200 percent.

She said Cambodia was not alone in this kind of kind of scam, and people should be suspicious of any company promising returns that are far above those offered by legal financial institutions.

“If the companies promise that putting money in will give an interest rate of 10 percent per month or 120 percent annually, we suspect that these businesses are lying because there is no business that can possibly earn such high profit margins,” she said.

Sokha Roy, an investor who claims he lost $45,000 to EBC, said he was first asked to deposit $2,000 and received $200 per month for five months before trusting the company with a lump sum.

On top of that, he pursuaded 10 of his relatives to put in as much as $220,000.

Ngeth Chou, senior consultant at Emerging Markets Consulting, said the government needs to take serious action to protect public confidence in the financial sector.

“Basically, if public trust is jeopardised, even microfinance institutions and life insurance companies could face trouble in mobilising deposits and selling their products,” he said.

He added that if the government’s estimate that the three firms absconded with $400 million were true, that would be the equivalent of almost 13 percent of the entire outstanding loan portfolio of Cambodia’s microfinance sector.

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