On 15/7, Nguyen Van Hoanh, 50, director of HP102 Vietnam JSC, was sentenced to life in prison by the Hanoi People’s Court for fraud and embezzlement.

Mr. Nguyen Van Hoanh before his arrest. Photo: Xuan Hoa

Mr. Nguyen Van Hoanh before his arrest. Photo: Xuan Hoa

Hoanh used HP102 JSC, a company ostensibly involved in advertising and equipment rental, to solicit investments by offering investors the opportunity to lease advertising equipment with high returns.

He used only a small portion of the invested funds to purchase equipment, spending the rest on personal expenses, company operations, and paying returns to earlier investors. By May 2020, he was unable to make payments.

The Supreme People’s Procuracy (VKS) determined that starting in May 2018, Hoanh organized seminars and introduced investment programs where investors paid 12.8 million VND for a set of advertising equipment (a TV and data loading device). His company would then lease the equipment and pay investors 1.6-1.8 million VND monthly, equivalent to an annual return of 50-70%.

Investors transferred money directly to Hoanh’s personal account or paid cash at the company, which was then transferred to his account.

According to the VKS, the investors were unaware of the actual equipment purchases or the company's business operations, focusing solely on the promised high returns.

Hoanh used a small portion of the funds for equipment purchases, with the majority going towards personal expenses, debt repayment, commissions, referral bonuses, and seminar costs.

The advertising equipment placements were short-lived and unprofitable, failing to generate the promised returns. The principal and interest owed to investors became substantial.

To meet payment obligations, Hoanh continued soliciting investments from new investors, creating a Ponzi scheme. By May 2020, the scheme collapsed, and he promised dividends to shareholders to avoid repayment demands.

As of 5/5/2020, 2,161 investors held active contracts with HP102. Of these, 415 had not received their full promised returns but had received more than their initial investment. They had invested nearly 29.7 billion VND and received 35.6 billion VND.

1,358 investors had not recouped their initial investments, having invested a total of 328 billion VND and received only 120 billion VND. The remaining investors opted for dividends but hadn’t received them, totaling over 86 billion VND.

Bank statements revealed that over two years, Hoanh received 409 billion VND from investors, averaging 17 billion VND monthly. He used only 8 billion VND for the advertised business, using nearly 300 billion VND to pay principal and interest to earlier investors.

He used the remaining funds to purchase an apartment, invest in other companies, and lost 84 billion VND in Forex trading, according to the indictment.

Tax authorities noted that financial reports from 2018-2020 showed an increase in equity from 1.6 to 110 billion VND, yet the company reported losses for all three years, with annual revenue only reaching 150-700 million VND.

Hoanh confessed, admitting that the cost of each equipment set was nearly 25 million VND while generating only 300-600 thousand VND monthly.

He acknowledged knowing the project was unsustainable from the outset. To maintain investor confidence, he used funds from later investors to pay earlier ones, creating the Ponzi scheme.

With monthly payment obligations of approximately 20 billion VND, he continually sought new investors. He also diverted funds for personal use, including Forex trading, buying a house, and repaying debts, instead of purchasing equipment.

Regarding HP102’s management, Hoanh claimed sole control, stating that he borrowed identification documents to complete registration procedures for other listed members.

The investigation found that company employees, brokers, and individuals listed on the board of directors were not involved in the scheme nor profited from it and were therefore not charged.

Hoanh defrauded 1,358 victims of 208 billion VND (approximately 8.8 million USD). 452 victims are seeking compensation of 181 billion VND. Hoanh has not provided any restitution.

Hai Thu