VietSec probed in gold scam

Authorities are investigating allegations of illegal online gold trading

The investigation was launched after locals claimed they were duped by online gold and foreign currency businesses that enticed customers to open accounts by misleading people about offering high returns and low risks.
The inter-sectional inspection team, including representatives of the State Bank of Vietnam, Ho Chi Minh City departments of Planning and Investment, Trade, and Police, is investigating VietSec, an arm of the Australia-based Somerset & Morgan Capital, which was found making online transactions on behalf of customers.
Prior to the investigation many locals had told the Vietnam Investment Review the Ho Chi Minh City-based company had mobilised capital from clients to carry out gold trading activities on the Loco market in London and wooed them into trading online.
Clients were asked to pay a security deposit to Somerset through VietSec before making any transactions. They were instructed by VietSec employees to deposit tens of thousands of dollars into accounts, download software from the Somerset & Morgan Capital website and trade gold online.
In the first days of trial trading, they always made a profit, but lost money on all the deals that followed. Clients lost amounts ranging from tens to hundreds of thousands of dollars.
VietSec, however, is not permitted to trade in gold and foreign currencies under its license issued by the municipal Department of Planning and Investment.
A second firm being investigated is Golden Rock Ltd, an online money trading brokerage company registered in Hong Kong. The firm was inspected after its chief representative, Stanley Elliot Tan, left Vietnam along with $10 million contributed by local investors.
Golden Rock was licenced to set up a representative office in September 2005. Though it did not function as a financial investment firm, it lured money from the public by offering high interest rates, up to 14-15 per cent per month. By the end of October 2006, the company had 1,000 Vietnamese clients and 200 business staff.
Trading in gold or foreign currencies is a form of foreign exchange that must be licensed by the State Bank to be legal, according to Nguyen Thi Minh Lan, head of the State Bank’s foreign exchange management department in Ho Chi Minh City.
“The State Bank has never issued such a license to VietSec and Golden Rock,” she confirmed. “Thus, those investors also violated Vietnamese laws when they directly conducted business with foreign organisations,” she added.
She also said such investors could not transfer money abroad through banks for the purpose of trading in currencies under banking rules without first declaring the purpose of the transfer.
Luong Van Ly, deputy director of the Ho Chi Minh City department of planning and investment, added that if these firms were found to have carried out the activities of mobilising capital and collecting money from clients, then they had violated the current laws, which say that companies cannot undertake activities not stipulated in their investment licences.



No. 791/December 11-17, 2006