FEATURES

19 December 2018

Crime Files: China Ponzi Scheme

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By: Syam Roslan
(Photo: Public Affairs Department)


The shutdown of China’s largest ever Ponzi scheme in 2016 garnered significant attention when it was reported internationally. A whopping 1.15 million victims were affected by the Ponzi scheme, which was worth 38 billion yuan (S$10.8 billion).

In our first feature of ‘Crime Files’, Police Life spoke to our Commercial Affairs Department (CAD) officers about the collaborative efforts with their China counterparts, which led to the successful recovery of more than S$27 million in relation to this scheme.
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The Multi-Million Dollar Crime

In February 2016, the media reported that Ezubao, an online peer-to-peer lending finance company,
was under investigation in China for conducting a Ponzi scheme that was worth S$10.8 billion. It was
also revealed in the media reports that Ding Ning, the Chairman of Yucheng Group and one of the
two masterminds behind the scheme, had given his alleged girlfriend, Zhang Min, Yucheng Group’s then President, a lavish villa in Singapore worth S$23.8 million.

The Thorough Investigation

Following the media reports, the CAD received further information that Zhang Min had maintained significant sums of monies in Singapore. The CAD team, led by Commercial Affairs Officer (CAO) Tan Ruiyun, then proceeded to engage the Chinese authorities and commenced a money laundering investigation in Singapore. Through their investigations, the CAD uncovered that more than S$27 million had been transferred to Singapore for the planned purchase of a Sentosa Cove bungalow, which fell through when one of the Ponzi scheme’s key accomplices were arrested.
The funds were subsequently seized by the CAD for further investigation.

As the Chinese suspects were not in Singapore during the CAD’s investigation, the team had to engage and coordinate extensively with China’s Economic Crime Investigation Department (ECID) to gather critical evidence. This was a complex process as there were several parties involved. Nevertheless, the CAD team worked tirelessly on its task and finally established that the seized funds of more than S$27 million were indeed crime proceeds related to the scheme.

The CAD team also established that Zhang had intended to purchase the villa through a property agent and a conveyance lawyer in Singapore. After paying more than S$5.4 million as the initial payment for the property, Zhang went uncontactable when the conveyance lawyer tried to contact her to complete the purchase. The CAD team eventually discovered that the property agent and conveyance lawyer were aware that Zhang was detained by the Chinese authorities. Despite knowing of Zhang’s arrest in relation to the Ponzi scheme, they did not file a suspicious transaction report with the authorities even though they had suspected that the money Zhang used towards the property purchase may be criminal proceeds from the alleged Ponzi scheme.

The Resolution

In China, 26 individuals, including Ding and Zhang, were sentenced to between three years’ jail and life imprisonment for their offences. In Singapore, the conveyance lawyer and property agent involved in the property purchase were convicted and fined S$10,000 each for failing to disclose knowledge and suspicion of the buyer. This is the first time that Singapore had prosecuted a conveyance lawyer and property agent for such an offence. As for the seized criminal proceeds, the CAD worked with the ECID and the Attorney-General’s Chambers to return the monies to the Chinese authorities in August 2018.

The Learning Points

When asked what motivated the CAD team throughout the long and tedious investigation process, CAO Tan mentioned, “We cannot allow criminals to enjoy the fruits of their illicit wealth. Hence, it is important to recover as much criminal proceeds and return them to the rightful owners as soon as possible”. The success in recovering over S$27 million is also a significant achievement for the CAD. “I have been investigating money-laundering cases for a number of years, and it is rare that we are able to recover such a substantial amount of criminal proceeds as the funds will usually be dissipated by the time we are made aware. I am very proud to have achieved this with my team,” said CAO Tan.
With the successful prosecution of the conveyance lawyer and property agent related to this case, CAO Tan hopes that it will send a strong signal to the respective industries on their obligations to file suspicious transaction reports should they detect any suspicious activity.

As there are bound to be complexities when investigating a crime that happens overseas, it is critical to establish a good working relationship with international counterparts to help detect and deter transnational crime.

Mr David Chew, Director CAD said, “This case is a testament to our commitment to work with our foreign counterparts to detect and deter transnational crime and preserve the integrity of our financial system. The strong ties between the Police Forces of China and Singapore is instrumental in ensuring that our financial system is not abused by criminals.”

CAD remains undeterred by challenges that transcend national boundaries and will spare no efforts to investigate any illicit flow of funds into Singapore, to preserve the integrity of our financial system.

WHAT IS A PONZI SCHEME?

It is a fraudulent investment scam that promises high returns for investors with little risk. The funds obtained by newer investors are used to pay off the profits reaped by earlier investors. Investors are usually led to believe that the profits come from product sales or any other means.

However, as soon as the new investments slow down or stop, the scheme will collapse, affecting the returns of all the investors.


 

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Last Updated on 19 December 2018