Ponzi scheme arrest in Japan
Kazutsugi Nami and other executives of L&G, which made bedding and healthcare products, are suspected by authorities of running a pyramid scheme that promised investors annual returns of 36 per cent in interest and to double their capital after three years.
Mr Nami, speaking to reporters, denied any wrongdoing, saying “it was not a fraud” and that he was “a victim of the police investigation”.
The suspected fraud would rank among the biggest of a growing number of such scams, the largest being the alleged $50bn Ponzi scheme operated by Bernard Madoff in the US.
It also highlights the difficulty the Japanese authorities have had in educating the public on fraud.
Police said 22 people, including Mr Nami, L&G’s chairman, were suspected of collecting Y118m ($1.3m) from six clients in 2006, in spite of knowing they could not pay promised returns.
Estimates of the sums of money involved varied. A trustee involved in the bankruptcy proceedings, lawyer Daisuke Fukuda, said the company collected Y226.5bn from 50,000 investors between 2001 and 2007, Bloomberg reported.
Japanese media, cited by Reuters, said that executives had gathered Y126bn from 37,000 people.
Under the alleged scheme, Mr Nami and others told investors that they would earn a 9 per cent dividend every three months, for every Y1m of investment. Investors were told that L&G had annual revenues of several billion yen. L&G is suspected to have been effectively bankrupt by 2000.
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