Bangladesh Bank smells big-bet investment fraud, launches action

All bank accounts of OGS Bangladesh have been seized by the central bank for allegedly running a Ponzi scheme that fools investors with lucrative profits, in a resurgence of MLM frauds.

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Scheme organizers often promise to invest one's money and generate high returns with little or no risk and with no investment of their own.

The action came following media report on detection of gross irregularities through offering windfall monthly returns to attract investors, in defiance of the rules.

"I have issued an order to seize all bank accounts of that company immediately just after seeing a media report," Bangladesh Bank Governor Dr Ahsan H Mansur told the FE writer.

The central bank has moved to take legal action and close operations of this company, he added.

"Already, I have ordered suspending operation of this company."

Earlier in a press statement, Bangladesh Bank had issued a note of caution against Pyramid, a Ponzi scheme or multi-level marketing (MLM) business.

According to the Bank Company Act 1991, section 31(1), collecting deposits or operating any banking business is a punishable offence.

"We all must raise voice to bring such fake companies to book that are involved in laundering hundreds of millions of taka," says Dr Mansur in a wake-up call against a resurgence of once-roaring run of such shell corporations.

The company's local and foreign trading accounts are found fake, sources alleged.

The company has obtained registration from the Registrar of Joint Stock Companies and Firms showing its intension to do many types of business, excepting the clandestine scheme, they alleged.

The firm, formed in October 2022, is based in Chattogram.

Bangladeshis remained a constant victim of MLM business for years.

Commerce ministry's data show MLM and e-commerce scams have robbed around 10 million victims of more than Tk 220 billion -- in a style like 'rob Peter to Paul'.

In the statement, issued last week, BB warned people against transacting with multilevel-marketing companies offering excessive returns on deposits, stating that such activities fall under money laundering.

The banking regulator is also investigating allegations of such fraudulent activities.

The central bank has said such investment schemes promise unusually high returns while seeking deposits or investments from members of the public.

Pyramid and Ponzi schemes are major features of multilevel marketing, which are highly risky as investors can lose their money, the BB said in a circular Sunday.

The BB has cited previous scams such as Jubok, Destiny, and recent e-commerce scams involving firms such as Evaly, where people were lured by offers of attractive profits and unrealistic discounts.

It sounds the alarm bell that these fraudulent models do not generate legitimate profits. Instead, they shift money between investors until the scheme collapses. "When that happens, most participants lose their investments."

The central bank emphatically reminds that only licensed financial institutions can legally collect deposits.

The regulator urges people to be cautious and avoid parking money in such schemes.

This time Bangladesh Bank took prompt action based on allegations before investors lost their money.

Earlier, such actions used to come only after big scams happened and people lost out hugely on fabulous stakes.

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