Deep Dive into Infamous Pyramid Schemes and Direct Sales Businesses in Thailand
In-depth analysis of famous cases! #PonziScheme and Direct Selling Businesses in #Thailand
An in-depth look at Ponzi scheme and direct selling businesses in Thailand.
Since 1987, the #directselling business in Thailand has seen numerous legal cases that have caused panic and damage to consumers, particularly fraudulent pyramid schemes and unethical business practices. Important examples include the Mae Chomoy Ponzi scheme (1987), considered the starting point of a large-scale financial fraud in Thailand; the Rice Ponzi scheme (2006-2007), another case involving a Ponzi scheme where perpetrators tricked people into investing in rice and entrusting it to a company for resale with promises of unrealistically high returns; and the U-Fun case (2015), which used cryptocurrency to deceive investors. Additionally, there is the Magic Skin case (2018), involving the sale of substandard cosmetic and dietary supplement products. These cases have highlighted legal loopholes and lax regulation of direct selling businesses over time, leading the government to increase preventative measures and stricter inspections of these businesses.
The Mae Chomoy Ponzi Scheme (1987): The Beginning and Collapse of a Major Ponzi Scheme in Thailand
Context of the Case and the Emergence of the Mae Chomoy Scheme
In the late 1980s and continuing into the 1980s, Thailand faced a large-scale Ponzi scheme that caused immense damage to society: the "Mae Chomoy Ponzi Scheme," one of the most infamous fraud cases of that era. The Mae Chomoy scheme arose during a time when Thais were seeking ways to increase their income through investment, as the economy was growing but investment channels were limited. This led many to become interested in investing in Ponzi schemes that promised high returns.
The Operational Model of Mae Chomoy
The person behind this scheme was Chomoy Thipso (commonly known as "Mae Chomoy"), who presented an investment model that offered very high returns. Mae Chomoy promised investors a high interest rate of 10% per month, meaning that an investment of 100,000 baht would yield 10,000 baht in interest every month. Initially, Mae Chomoy paid the promised returns, gaining investor confidence and leading them to increase their investments or encourage acquaintances to join.
Mae Chomoy's scheme was a Ponzi scheme, meaning that money from new investors was used to pay returns to old investors instead of generating actual profits. The initial operations appeared credible, leading to a continuous increase in investors and the growth of a large network.
The Collapse of Mae Chomoy's Scheme
Problems began when Mae Chomoy could not find enough new investors to pay the promised interest, and news began spreading that many investors had not received their money back as agreed. Investor confidence began to waver, and those who had invested tried to withdraw their money, but because the system did not generate real income, it was impossible to find the money to repay the investors.
Finally, in 1987, Mae Chomoy decided to close the scheme and flee, leaving investors with enormous financial losses. Numerous victims across the country lost between tens of thousands and millions of baht.
Impact of the Case on Society and the Law
The Mae Chomoy pyramid scheme sent shockwaves through Thailand's investment landscape, impacting both individuals and the economy. Many lost their savings and fell into hardship. The case eroded trust in investment models offering unrealistically high returns and exposed loopholes in the legal system and oversight of investment businesses at the time.
Following the case, government agencies and relevant sectors, such as the Bank of Thailand and the Securities and Exchange Commission (SEC), increased scrutiny of direct selling and investment businesses to mitigate the risk of future pyramid schemes.
Legal Proceedings and Penalties
After Mae Chomoy's escape, the police and justice system expedited her pursuit. Arrest warrants were issued, and further investigations were conducted to recover the embezzled funds. However, tracking Mae Chomoy took several years because she hid and moved between locations.
Lessons and Future Prevention Measures
The Mae Chomoy pyramid scheme became a case study for Thai society, highlighting the risks of investing in pyramid schemes. And it served as an important lesson that government agencies used to develop investment control laws. Subsequently, measures such as inspection and certification of the operations of direct selling and investment businesses were strictly enforced to prevent similar incidents from happening again.
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