Suspected pyramid scheme firm folds after taking HK$40m from Chinese investors

Investment firm suddenly folds after taking millions from mainland and Hong Kong clients; police investigate suspected fraud

PUBLISHED : Wednesday, 22 August, 2012, 12:00am
UPDATED : Wednesday, 22 August, 2012, 3:24am

An investment company abruptly folded after taking HK$40 million from mainland and local clients in an alleged pyramid scheme, police said yesterday.

Crime squad officers are investigating the directors and employees of the unnamed company after investors went to its offices in Tsim Sha Tsui and found no employees there.

Initial investigations showed that more than 500 investors were lured to join the scheme over 12 months, investing about HK$41 million, with the promise of rich returns from property development, police said.

"The company placed advertisements on the internet, but we believe most of the victims knew the firm through their friends and relatives," a police investigator said. "The victims were told that the investments were linked with real estate development projects in Macau and the mainland."

The company is understood to have offered clients different levels of investment with different rates of return, with the opportunity to become diamond, gold, silver and bronze members.

Victims were told that the larger the amount they invested, the bigger the returns.

Police were called after 34 investors found that the company had folded and no one was in the office at Concordia Plaza on Science Museum Road on Monday.

They went to Tsim Sha Tsui police station to report the alleged fraud on the same night. The investors were last in contact with the company about two weeks ago, police said.

"One of clients had invested US$230,000. It is the largest single sum in the scam," he said.

At about 3.30pm yesterday, a team of officers checked the office with a search warrant and seized boxes of documents that listed the details of more than 500 clients and their investments.

Police classified the case as suspected fraud, and detectives from Yau Tsim Mong district crime squad are investigating. So far, no one has been arrested.

Police urged people to be cautious if approached with offers of huge returns on an investment.

Pyramid schemes are investments in which participants hand over cash and must recruit more members in order to profit.

The Pyramid Schemes Prohibition Ordinance, enforced in January, made anyone knowingly involved in the scheme liable to prosecution. It closed a loophole which exempted schemes that did not involve the sale of goods or services from prosecution.