An apartment building developed by Tan Hoang Minh in Hanoi. Photo courtesy of Tan Hoang Minh
Subsidiaries of property developer Tan Hoang Minh buy bonds from each other and illegally resell them to retail investors in an “investment partnership”.
The Hanoi-based company saw its chairman and five other current and former executives arrested this week for alleged fraud in nine bond issues that raised more than VND10 trillion ($437 million) between July 2021 and March 2022.
Each was intended to raise funds for a sister company and not for the issuer itself.
One such issuance was made by real estate subsidiary Vietstar in July 2021 when it raised VND 800 billion to buy over three million shares of Viet Tien Investment, Development and Trading, another subsidiary.
Tan Hoang Minh chairman Do Anh Dung became a legal representative of Viet Tien in 2017, and he and his two sons own the closed company.
Two Winter Palace shows and three by Soleil Investment and Hotel Services worth VND 2.2 trillion was used for a joint investment with Hoang Hai Phu Quoc House Investment Development Corp, whose legal representative is Dung’s son, Do Hoang Viet.
Data from BaoViet Securities and An Binh Securities shows that the company’s purchase of VND 1.6 trillion in bonds from Vietstar and Soleil meant money transfers between Tan Hoang Minh and its subsidiaries.
But Tan Hoang Minh did not buy the bonds with his funds, and instead invited retail investors to “associate” with him and offered guarantees of 12% interest per annum.
In recent months, brokers announced the bonds on social media promising that anyone with more than VND 100 million could become a partner.
Vietnamese laws do not allow companies to issue private placement bonds to the public and can only sell them to professional investors, defined as those who hold a total of securities of more than $2 billion or whose income taxable is 1 billion VND.
But for Tan Hoang Minh’s issues, the brokers even promised to provide a professional investor certificate to those who were not qualified.
Investors, mostly inexperienced, unaware of the risks involved, invested their money because of the high interest rate offered.
Tan Hoang Minh recorded a loss of VND 2.48 trillion in 2020.