Police arrest eight in connection with ?cash planting? scam

PUBLISHED : Friday, 26 May, 2006, 12:00am
UPDATED : Friday, 26 May, 2006, 12:00am

Updated at 2.25pm:
Police have arrested three men and five women on charges of conspiracy to defraud in a ?cash-planting? scam involving about $2.16 million, a police spokesman said on Friday.

The spokesman said the eight were arrested on Thursday. They were directors and core members of a company located at the Hong Kong International Trade & Exhibition Centre in Kowloon Bay.

A police investigation revealed that from February last year to this May, the eight had lured about 200 victims into fraudulent cash-planting schemes.

All victims were told to pay about $2,100 each for joining the scheme and in return they would receive a net profit of HK$9,200 in an 18-month period.

The loss to the victims involved is approximately $2.16 million.

All the arrested persons, aged between 29 and 52, are being detained for further questioning.

Similar cases involving fraudulent pyramid schemes have occurred in Hong Kong in recent years.

Last April, police arrested 12 people in connection with a cash-planting scam. The case involved nearly $10 million.

The most notorious one occurred in May 2001 when the bosses of two companies were arrested for allegedly defrauding 15,000 recruits, running up a cash flow of $100 million.

Pyramid schemes are scams were the participants attempt to make money solely by recruiting new participants into the scheme.

?The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.? explains the US Securities and Exchange Commission website.

Cash-planting schemes are fraudulent investment schemes involving periodic investments for a promised return. They are similar to pyramid schemes ? although they may not always have a typical pyramid structure.

A police spokesman explained that such schemes ?usually start from a small investment with a small return which will gradually advance to a very high promised return after a period of time?

?These investment schemes, so called ?cash planting? schemes, do not involve much genuine business, but the promised return mainly depends on new members? contribution.?

?These fraudulent schemes and cash planting, without genuine business, could not sustain themselves at the end and result in losses of members,? he warned.