SOUTH CHINA MORNING POST: American Among 5 Detained In Hong Kong Pyramid-Scheme Investigation; Unidentified Firm Said To Promote ‘Cloud-Based’ Internet Apps And To Have Gathered Nearly $100 Million
FLASH: The South China Morning Post is reporting that an American and four others have been detained in a pyramid-scheme investigation involving HK$750 million (about U.S. $96.7 million). The publication did not identify the detainees. Nor did it identify the company, which is said to promote “cloud-based internet productivity and communications applications” and to be headquartered in the United States.
The arrests occurred Wednesday in the Hong Kong area of Hung Hom, after a police raid, the SCMP reported, citing unidentified police sources. (NOTE: The PP Blog has established a tentative identification of the company, but is not publishing the name until it can be fully confirmed.)
From the SCMP (italics added):
Investors were lured with the promise of lucrative returns and told the company had investments in information technology in various countries and plans for a public listing, the source said. (Emphasis added by PP Blog.)
Initial investigations showed each of them was required to pay a HK$25,000 membership fee to join the company, which in return would give them lucrative dividends when the firm was listed on a stock market,” he said.
The American “is understood to be from another firm,” and authorities are seeking to determine if the firms are linked, the SCMP reported.
Schemes in which investors are recruited based on assertions that they’ll receive a handsome payout when a firm later “goes public” may be on the uptick.
In October, the SEC charged five companies, three executives and eight promoters in what it described as a “worldwide” pyramid scheme operating through entities from Hong Kong, Canada and the British Virgin Islands.
At the center of the scheme were entities known as CKB and CKB168, the SEC said. Investors were told they’d accumulate “profit rewards points” that could be converted “into shares of CKB stock when the company conducts an initial public offering (“IPO”) on the Hong Kong Stock Exchange sometime during 2014, the SEC said.
“Despite Defendants’ representations to the contrary, the Prpts are worthless and cannot be meaningfully traded, sold or exchanged. Nor has CKB taken required steps to prepare for the promised IPO and, in fact, does not meet the Hong Kong Exchange’s current listing requirements. Even if the IPO were to occur, CKB would have to go public as one of the world’s largest companies in order to honor conversions of the ever-expanding universe of Prpts,” the SEC said.