An agricultural company running a pyramid scheme in Laos has defaulted on millions of U.S. dollars owed to its stakeholders, leading observers to question why the government has failed to adequately regulate the market and inform investors about potential pitfalls.
The PS Agriculture and Industry Promotion Import-Export Company of Laos registered as an agricultural company in 2012 with 900 million kip (U.S. $109,240) of capital to produce purified drinking water, noodles, run a rice mill, and farm organic chickens and vegetables.
The company solicited deposits of between 500,000 and 5 million kip (U.S. $61 and $608) per person for an expansion fund, promising monthly interest payouts of at least four percent, and bonuses of 24 percent to those who maintained their deposits for a year—far surpassing rates offered by Lao banks.
PS Agriculture’s fund grew to include more than 200,000 investors with deposits worth more than 900 billion kip (U.S. $109.3 million), but after the government issued a warning at the end of last year calling the investment scheme illegal because the company was not registered as a financial firm, stakeholders began to withdraw their money.
The company ceased providing promised interest payments in January this year and as more investors sought to withdraw their capital, they found it had been used to build infrastructure and attract new deposits through high rates of return, leaving them little recourse. Currently, only around 50,000 investors remain with PS Agriculture.
One investor in the capital Vientiane told RFA’s Lao Service Tuesday that she had unwittingly bilked friends and family out of millions of U.S. dollars by urging them to invest in the fund, and said it was unclear if they would ever see their money again.
“At first, I was getting paid around six percent interest on my total capital, so I persuaded my friends and family to invest a total of 50 billion kip (U.S. $6.07 million),” said the investor, who spoke on condition of anonymity.
“We received interest up until January 2017, but after that, the company didn’t pay us, so our group decided to withdraw the investment when our one-year contract was completed this month. Now, the company says it has no money … [and instead will] provide us with drinking water to sell.”
Another stakeholder confirmed that PS Agriculture currently has no way of repaying investors because its liquid assets had been tied up in infrastructure expansion.
“The company used the money to build a purified drinking water plant, vegetable and chicken farms, and other facilities,” he said, asking to remain unnamed.
Sources also acknowledged that investors were to blame for pursuing what they saw as a get-rich-quick scheme, without fully researching how PS Agriculture’s expansion fund operated.
Four other stakeholders told RFA that the majority of people who decided to contribute to the fund based on the advice of friends or family “didn’t understand the contract” behind their investment or even the “basic procedures of the company.”
In a statement released on YouTube earlier this month, PS Agriculture president Por Her claimed that “problems have occurred because Lao people do not understand marketing strategy, and only join [with investments] according to popular trends.”
“The company will try to adjust and change [its policy], and slowly pay money to our customers according to principles, contracts and schedule, and [we] ensure that no one will lose money,” he said in the video statement.
Currently, PS Agriculture owes its investors around 100 million kip (U.S. $12.14 million), and while the Bank of the Lao PDR—the Central Bank—issued a notice early this month ordering that the debt be repaid by July 6, company officials have requested an extension, saying it will not be possible.
On June 9, Por Her told RFA that his company is still willing to pay overdue “dividends” to its investors, but said it would take time, suggesting that profits for shareholders were based on PS Agriculture’s performance, rather than a fixed interest rate.
“We have already requested an extension from [the Central Bank] for paying investors back,” he said.
“For those who still have money deposited with us, know that we will gradually sell our products, maintain our business, and pay you back. And for those who are unhappy they can still withdraw, right? But to asking us to pay them back in one month is something that cannot be done.”
The same day, the PS Agriculture president published an audio clip to the website Tholakong.com telling investors that “whenever I can make money, you can be paid back,” adding that the company “has to operate in order to make you money.”
“Frankly, if you will come to withdraw the capital in three months, we will have nothing to give you except my bones,” he said.
On Tuesday, PS Agriculture’s chairman Souknaly Thepsymueang was called for questioning by the National Assembly’s Justice Committee as part of an investigation into the company’s activities, during which some 10 investors delivered a petition calling on lawmakers to resolve the situation.
It was not immediately clear what action the committee plans to take, if any.
A Laos-based legal expert told RFA that PS Agriculture’s product line served merely as a front used to “trick” the public into contributing funds, and called on the government to do more to monitor the investment market to prevent similar scams in the future.
“The company operates its business by taking money from one person and paying it as interest to another,” he said.
“To do so, team leaders work as brokers, hunting for innocent investors as victims. Once they find investors, they are paid higher commissions and interest. The operation is a scam.”
The legal expert said PS Agriculture is just one example among “many cases” of pyramid schemes in Laos.
“The problem is that no economists or relevant government officials are taking serious action aimed at prevention or ensuring the public has access to information [that would protect them from scams],” he said.
In August last year, the Lao Securities Commission Office advised the public that depositing money with companies promising higher return rates than banks put them at risk of losing their savings if the firm goes belly up, according to a report by the Vientiane Times, adding that it will not be held responsible in such case, even if the company has legally registered its operations in Laos.
In 2015, investors lost more than U.S. $15 million in a pyramid scheme run by Malaysian company Lao Maxkey-Stable Limited. The government forced the company to cease operations and opened an investigation into the company’s business practices, leading to the arrest of five people.
Reported by RFA’s Lao Service. Translated by Ounkeo Souksavanh. Written in English by Joshua Lipes.