2b yuan 'Ponzi' bank scam exposed

PUBLISHED : Wednesday, 28 September, 2011, 12:00am
UPDATED : Wednesday, 28 September, 2011, 12:00am


A private moneylender in the Inner Mongolia Autonomous Region is being held for manipulating state-owned banks and staff to funnel people's money into her accounts in a multibillion-yuan Ponzi-type scheme.

At least 2 billion yuan (HK$2.43 billion) in funds from state banks was found to have been misappropriated to an ethnic Mongolian woman named Tuya. And it could be as high as 6 billion yuan, according to unidentified sources quoted in Caixin Century magazine.

Tuya was said to have created a Ponzi scheme by using employees at state-owned banks to redirect money from savings accounts to fund loans she was issuing. To cover up holes in her unsustainable venture, she made frequent transfers between her many accounts at various state-owned banks.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any profit earned by the individual or organisation running the scheme.

Since at least 2005, Tuya had worked 'in co-operation' with local branches of various state-owned banks, Caixin Century reported. Her first alliance was with the Agricultural Bank of China's Inner Mongolia division, it said.

This lasted until June this year when the Bank of China's Inner Mongolia division noticed 'abnormal behaviour in up to 40 local accounts'.

By removing some staff members, an internal reshuffle cut off Tuya's access to the funds in the Bank of China's division.

In a desperate move to seek additional funds, Tuya allegedly planned to kidnap the bank's division chief, but instead kidnapped his wife and demanded a 200 million yuan ransom. The report also said Tuya demanded that her Bank of China collaborators, who were then under investigation, be reinstated to continue helping her.

It was only after the kidnapers were rounded up by police that the size of Tuya's illicit business operation began to draw the attention of police and banking regulators.

Caixin Century quoted public security authorities as saying that at least nine suspects were arrested. Six are accused of financial crimes and three over the kidnapping.

At least five banks were involved in Tuya's exploits, it reported.