Investment promises too good to be true
The fraudulent online trading platform MTFE willingly ceased operations a month ago, absconding with at least a thousand crore taka from tens of thousands of Bangladeshis.
Scammers have become increasingly smarter in their techniques of deception, luring individuals with enticing job offers and non-existent investment opportunities, often with the red herring of working capital and partnership agreements, promising returns that are too good to be true. Despite breaking up some of the major scams, these fraudulent schemes continue to thrive as scammers leverage digital technology and social media platforms to attract eager investors.
These suspect schemes are not hard to find on the Internet and social media. The Business Standard uncovered several ventures resembling scams like Ponzi schemes, posing a significant risk of the sponsors absconding with substantial sums of money from individuals who have been lured in by the promise of substantial returns.
One such suspected case involves Rubel, the proprietor of RB Corporation in Paltan, Dhaka.
Presenting himself as a clothing trader who supplies products outside Dhaka, Rubel recently sought silent partners and extended an enticing offer to an undercover TBS reporter. A silent partner, in business parlance, is someone who provides capital to the business but is not involved in the day-to-day running of it.
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He guaranteed a monthly return ranging from 5% to 8%, equivalent to an astonishing annual rate of 60% to 96% or around seven to 14 times more than what banks offer on deposits. The return increases in proportion to the size of the investment, but there is a condition: The investment must remain with him for a minimum of one year.
Rubel was asked why he did not look for bank loans, which currently carry slightly over 10% interest rate.
Rubel had a ready response: The paperwork was a big hassle, there was no guarantee of the loan and the tax and compliance hurdles involved in securing bank loans were something he wished to avoid.
These scam baiters typically share a link and aggressively urge potential victims to complete a registration process, which requires providing confidential personal information like their NID numbers and bank account details.
Another method employed to deceive individuals involves offering enticing job opportunities, such as claiming, "You have successfully passed the job review and are eligible for a daily salary of Tk2,000."
Many fraudulent cyberworld operators abruptly wind down their offices. Subsequently, investors, often numbering in the hundreds, scramble to recover their funds, sometimes without any profits.
This is how people continue to fall prey to fraudsters, even though the methods employed are nothing new, dating back decades, said US Association of Certified Fraud Examiners Fellow Major Mohammad Shamsuzzoha (retd).
"The only difference is that the Internet appears to facilitate the spread of these schemes faster than previously," he said.
"Despite knowledge of similar scams operating – promising high returns – such as Hundi Kajol, Destiny, Unipay, Evaly, Eorange, and the most recent one, MTFE, people still become victims of Ponzi schemes," he added.
The fraudulent online trading platform MTFE willingly ceased operations a month ago, absconding with at least a thousand crore taka from tens of thousands of Bangladeshis.
Just last month, the police arrested a trader, Ridoy Mia, following complaints that he had received large sums of money from a victim, initially delivering attractive monthly profits and subsequently absconding with both the principal and profits. Asaduzzaman, the officer-in-charge of Vatara Police Station, confirmed his arrest.
A few years ago, an NGO executive in his late 30s fell under the spell of Ridoy Mia's discounts at his Gulshan DCC market shop, which conveyed a message of lucrative profit margins in the business to all his loyal customers.
Speaking anonymously, the victim said, "At least 30 individuals like me fell into Mia's trap, enticed by his warm relationship with everyone and the investment opportunities he offered."
Mia, who has not made any payments for the last six to seven months, citing business troubles, owes over Tk10 crore to his victims, according to two of them who spoke to TBS.
One of them regretfully acknowledged, "What good are the deed papers to me now? They can only ensure his imprisonment. I can't find any meaningful way to recover my money, and I deeply regret my greed-driven decision to invest all my savings in an unregulated scheme."
There are more than a dozen online platforms still active, targeting unsuspecting investors.
For instance, SRA, SFXT, Tron Link, Hilton Meta, GX Global, Meta Forse, CFX Trading, and APLGO – all have user groups in Bangladesh, as early users attempt to expand these schemes to lure more individuals seeking to profit from them like Multi Level Marketing or MLM.
Who falls prey to fraudsters?
Fraudsters cast a wide net, targeting two distinct groups of individuals. The first comprises those with surplus funds actively seeking high-return opportunities. The second group consists of people with limited incomes and savings, struggling to earn more money.
Al-Amin (not his real name), belongs to the latter category. Relying on his savings due to pandemic-related business losses, the 53-year-old Dhaka resident struggles to manage daily expenses amid a soaring inflation. He is desperate for higher income but hesitant to revisit his prior business ventures haunted by past losses and grappling with post-Covid complications.
Scouring social media, he stumbled upon numerous posts and advertisements from "young SME entrepreneurs" desperately seeking capital through unregulated crowdfunding, informal partnerships, or traditional lending-borrowing arrangements. Each promised return 2-8 times higher than any formal savings instrument in the country.
Fortunately, Al-Amin, once reliant on borrowing from friends and relatives to grow his business, steered clear of investing in Rubel's RB Corporation.
Al-Amin's suspicion stemmed from doubts about the authenticity of the alluring rates being offered. Additionally, RB Corporation's website blunder – displaying random foreign executives' photos and names as team members – raised red flags.
Rubel, however, claimed to be innocently awaiting the completion of his website. He professed ignorance about the false, misleading information on his site, despite sharing the website address in his social media capital-seeking posts.
In the name of digital services
TBS has also uncovered several businesses with suspicious indications of potential scams.
For instance, Center of Digital Marketing (CDM) in Uttara, the capital's rapidly growing residential-business hub, has achieved an impressive track record over the past five years excelling in digital marketing services, web design and development, videography, photography, call centre services, business consultancy, and training. Now it seeks financiers through its social media advertisements.
Md Qaium, the chief marketing officer of CDM, envisions tremendous potential, stating, "A fund of Tk50 lakh will enable us to establish our multimedia studio, which in turn will substantially increase our annual profits."
He offers a minimum fixed return of 2% per month, with the possibility of even higher returns through profit-sharing arrangements despite the fact that he could borrow from banks at a half cost of finance.
Qaium asserts that the small enterprise, founded and led by his wife, Sharmin Akter Ruma, currently generates over Tk25 lakh per month, and this figure could further soar once the under-construction multimedia studio is completed.
During an undercover visit to the three floors of CDM, housed in the same building (one for residence, one for the office, and one for the studio), CDM gave an impression of a bright future in business. It claims to have served several thousand business clients.
Qaium expressed their preference for a select few like-minded long-term equity partners instead of raising capital from numerous sources. Ruma, who holds a marketing degree, shared, "Approaching banks for capital is futile, as it would expose us to tax and VAT obligations, and, more crucially, banks typically do not lend to firms like ours."
What if the couple can convince hundreds of such investors through their online advertisements and make away with crores of taka?
"Islamic offers" in common
Many of these ventures offer investment opportunities through both traditional fixed returns and profit-loss sharing methods, catering to the preferences of a diverse investor base, including observant Muslims.
The Islamic way of business partnership, another ruse, also paves the way for refusing to pay the periodical payments the fraudsters once assured of as a silent partner is barely able to cross-check if the active partner made profits or not.
One example is RS Jeans, a Gazipur-based apparel manufacturing partnership formed by a group of friends. They are now expanding into TSA Jeans, maintaining a years-long track record of benefiting their investors, much like RS Jeans.
Abu Shahin, the founder of TSA Jeans, confidently stated, "Providing our financiers with a consistent 2%-3% monthly return throughout the year is not a challenge, and during peak seasons, we can offer even higher returns. We currently have 20 sewing machines and anticipate rapid growth."
Numerous other businesses, including Styleway Panjabi in Uttara, Deemas Life Style, Pakistani Dress Wholesale in Bangladesh in Mohammadpur, Perfect Auto Motors in Jatrabari, J&J Fashion Shoes in Kamrangirchar, Ishaque Nur Trading in Chapainawabganj, Tanhabib dot com in Sylhet, and several real estate projects, are actively seeking silent partners and working capital financiers.
Some, like the owner of Styleway Panjabi, declined to offer a fixed return due to religious beliefs. Instead, they assure potential investors of 3%-8% monthly returns, relying on "divine blessings" for business success.
Conversely, individuals like Maruf, who co-founded "Pakistani Dress Wholesale in Bangladesh" with his wife, initially rejected traditional investment models but later embraced a fixed-interest arrangement for the capital they sought.
What experts say
Access to formal finance has historically been a challenge for grassroots microenterprises throughout Bangladesh. However, experts believe the extent of this problem may not be as significant as claimed by the fraudsters when they ask for public money.
The introduction of mandatory tax returns since July this year has indeed posed challenges for many microenterprises seeking bank loans, as they perceive the process to be complex, according to Syed Abdul Momen, DMD and head of SME at Brac Bank, which boasts the largest SME loan portfolio in the banking industry.
Nevertheless, Momen emphasises that the cost of tax-VAT compliance is minuscule compared to the exorbitant finance costs the fraudsters were willing to bear – ranging from 25% to 90% annually.
Md Kyser Hamid, vice chairman of the Bangladesh Leasing and Finance Companies Association (BLFCA), shares Momen's sentiments. He refutes the claim that banks are unwilling to lend to small, informal enterprises. Banks, non-bank financial institutions (NBFI), and microfinance institutions collectively have over Tk2.4 lakh crore in loans dedicated to cottage, micro, small, and medium enterprises.
Hamid, who also serves as the managing director and CEO of Bangladesh Finance, a top-tier NBFI, suggests the government should actively monitor high-interest informal borrowing practices to prevent the growth of Ponzi schemes that capitalise on people's desperation for lucrative returns on their savings.
Numerous banks and NBFIs are actively competing across the country to identify honest, hardworking small entrepreneurs to lend money. They are offering even Tk25-50 lakh loans without collateral, with interest rates capped at 13% annually.
Central bank-refinanced schemes have even pushed interest rates for such loans below 5%. Entrepreneurs can secure loans within the first few months of their venture when bankers recognise their commitment to business.
Islamic financing options are also available for CMSMEs with minimal documentation requirements, cancelling the need for such enticing online ads seeking capital.
Mohammed Mosharaf Hossain, MD and CEO of Islamic Finance and Investment, explains that Islamic lenders cover procurement bills on behalf of their borrowers, offering working capital for manufacturing, transportation, and shipment at a cost of finances lower than 14%.
SME loans are disbursed at a much faster speed if a business is worthy of it, said the banker.
What police say
At this moment, it is uncertain which of the "enticing SME partnerships or lending-borrowing opportunities" might ultimately reveal themselves as Ponzi schemes, potentially victimising many individuals.
Md Bayzidur Rahman, assistant commissioner of the Cyber Crime Division of CTTC, informed TBS that his division routinely monitors and vigilantly observes offer-based scams and online fraudulent activities within cyberspace.
However, he emphasised the necessity of an official complaint to initiate legal action, stating, "We require a formal complaint to take any action."
