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Tan Hoang Minh case raises fears about asset appropriation via bond issuance

The Tan Hoang Minh case shows that previous warnings by experts about the fraudulent appropriation of assets through bond issuance were well-founded.
 

 

On April 5, the investigation agency filed charges against Do Anh Dung, chair of Tan Hoang Minh Group, and accomplices, and detained them for “swindling to appropriate assets”.

Initial investigations found that from July 2021 to March 2022, Dung and individuals at Tan Hoang Minh Group committed fraud, using three subsidiaries and related companies to issue nine corporate bond issuance campaigns worth VND10.3 trillion. The money was not used for the business purpose stated when issuing the bonds.

The investigation is clarifying what the money was used for, where the money is, and which types of assets the money has been converted to.

Prior to that, in late 2021, the State Securities Commission (SSC), when inspecting bond issuance at VsetGroup, discovered abnormalities which posed high risks for investors.

VsetGroup signed 678 bond sale contracts from January 1, 2020 to October 27, 2021 with total value of VND208.6 billion but did not provide signed contracts as requested by the inspectors.

VsetGroup also could not provide documents related to the use of the money raised from the bond issuance. The proceeds from bond issuance, and the payment for bond interest and principal were not entered in the accounts in their financial statements as of December 31, 2020 and June 30, 2021.

Meanwhile, the money raised from bond issuances were withdrawn by individuals from the company’s account, and this was not shown in books.

Experts have repeatedly warned about risks from loose requirements on bond issuance. In order to get bank loans, businesses have to prove the efficiency of their business plans, and lenders must follow a strict disbursement process. 

But businesses don’t have to have mortgaged assets to make a private offering and don’t have to have a guarantee. Bond issuers are not under supervision over their use of money. As a result, many businesses use money for the wrong purposes and fall into insolvency.

Analysts say there is a bond rush as businesses are rushing to issue corporate bonds with high value, and it’s still questionable if the money is used for the right purposes.

An expert at a recent investment forum spoke about a business that mobilized several trillions of dong from the public through bond issuance, but only several hundreds of billion dong was used to develop projects, while the remaining money was used to pay bank debts and buy agricultural land. The business ended up incurring a big loss. 

In early September 2021, MOF instructed the State Securities Commission to strengthen inspection and supervision over bond issuance activities and bond services.

Tran Thuy

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