Geneva whodunit has Chinese alleging US$1.2 billion currency scam

[GENEVA] Street protests in Beijing and Hong Kong. Chinese investors flying 5,000 miles to show up on doorsteps in Geneva and demand their money back. It's the fallout so far from an alleged scam that its victims say robbed 29,000 Chinese investors of US$1.2 billion.

They were promised returns of as much as 10 per cent a month from currency trading by API Premiere Swiss Trust AG and associated companies, according to interviews with six victims and documents they shared over the past three months. The money disappeared from their accounts in January, the investors said.

"We wanted to know the truth," said Chen Biya, 43, an advertising agency owner in Beijing who flew to Geneva in late March with two dozen fellow investors to try to recover their missing millions. They sought redress at API's locked former offices, the public prosecutor and in meetings with lawyers, then went to Bern and Zurich to appeal to the Chinese embassy and Swiss Financial Market Supervisory Authority, known as Finma, he said. "But nobody has been able to tell us the entire story." Unprecedented billions of yuan flowing from China and into investments around the world are creating opportunities for fraudsters, as well as legitimate money managers trying to get their hands on the cash. The cross-border nature of the flows is posing challenges for regulators and crime fighters alike.

"Frankly, the law enforcement authorities tend to be focused only within their own jurisdictions and move deadly slowly on investigations," said Steve Vickers of Hong Kong- based risk consultancy Steve Vickers & Associates, who said the large amounts of capital seeking offshore havens, some by circumventing China's currency controls, make Chinese more vulnerable to cross-border crime.

Geneva's public prosecutor confirmed it's investigating API and an associated company, Alpen Asset Management Trust Sarl - both described as "heavily indebted" by Finma, which initiated bankruptcy proceedings against them last month. In January, Finma issued a public warning that API and Alpen were wrongly claiming to be licensed and supervised by the Swiss regulator. It came about 10 days after the investors said they discovered their accounts had been emptied.

Offices formerly used by API in Geneva were vacated months ago, while a Hong Kong office was also abandoned, with a writ for unpaid rent left stuck to the doors.

"Both companies used their Swiss image to attract new clients, although they were mainly managed from abroad," said Vinzenz Mathys, a spokesman for Bern-based Finma. "This, along with the losses endured by depositors, has a negative impact on the Swiss financial market's good reputation." Chinese investors said they thought the company's claim it was regulated in Switzerland made it secure.

"Switzerland is famous for its financial-services industry," said Han Mingyun, a 65-year-old widow in Wuhan who said she was lured by the promise of a Swiss investment and saw US$45,000 in savings disappear. "They are supposed to be the best and safe." Asked last week about the alleged scam and API's use of Switzerland to draw investors from China, Finma's Chief Executive Officer Mark Branson said: "Where there is a financial center, people will always try to take advantage." In Beijing, scores of investors have held three protests, the latest on May 20 outside the government petition office in Dongcheng district, urging that Chinese police set up a unit to investigate. The Beijing Public Security Bureau and Ministry of Public Security didn't respond to faxed requests for comment. Two telephone calls to the petition office went unanswered.

"We want the police to strengthen their investigation," said Han, the widow, who took part in the latest Beijing protest. "People around the country are still suffering from the scam." The investors said they are aware of complaints from places including Shanghai, Zhejiang, Chengdu, Chongqing, Jiangsu, Hubei and Shenzhen and they believe their ranks number 29,000 people who lost the equivalent of US$1.2 billion. They were directed to deposit money in bank accounts in Hong Kong or China, where API representatives told them they would send the money to Switzerland, they said.

Some of the individual investments totaled more than 1 million yuan (S$216,571), according to a report by China Central Television. China's capital controls limit the amount that can be taken out of the country to US$50,000 a person per year.

After the money in their online API accounts disappeared, investors said they received a message from the company saying it had been hacked, urging patience and time for API to restore balances and compensate customers. After that, they were unable to contact company representatives, they said.

Investors in Hong Kong staged a protest outside a police station in Kowloon demanding stepped-up efforts, according to photos on a website created by API's investors to share information, which didn't post the date.

A lawsuit against a company called API Premiere Ltd. filed in Hong Kong's High Court by investor Sun Zhiming said a representative of API approached him on an instant-messaging service. Sun then invested HK$147 million (S$25.56 million) for gold and foreign-currency trading, which disappeared, the suit said. API Premiere's director listed in the Hong Kong Companies Registry is Ong Chew Hoon of Singapore.

Visits to listed Singapore and Hong Kong residences for Ong didn't locate him, with one address proving to be false. A mobile phone number for Ong provided by investors isn't in service. Police spokesmen in Singapore and Hong Kong wouldn't comment on whether Ong is the subject of an investigation.

Hong Kong police are investigating 136 complaints of suspected fraud from investors who said they invested a total of HK$415 million with API, according to a police spokeswoman who didn't give her name due to policy.

Over the past two years, API's representatives pitched investments in Hong Kong and China, hosted an investor event in Singapore - offering free flights and five-star accommodation - - and gave incentives for people to draw in their friends, according to the investors.

API's website cites a history in Switzerland stretching back 59 years, services including algorithmic trading and wealth management, and offices in Geneva, Zurich and Hong Kong, with Shanghai "coming soon." Its explanation of foreign-exchange trading was taken from Wikipedia. Its promotional video shows luxury yachts on Lake Geneva, traders at computer screens and a Chinese man identifying himself as the vice president of greater China for API climbing into the passenger seat of a Ferrari so that the "boss," whose face isn't visible, can show him around.

Turning up unannounced in Switzerland in March, the Chinese investor group "made a desperate whistle-stop tour of the public prosecutor, the financial regulator and the Chinese embassy in search of a remedy," said Franco Foglia, a lawyer in Geneva who was also among those who met with the investors in their search for help.

"I was convinced they are the victims of a fraud, and I can't imagine how hard it must be to find justice for a scam they barely understand in a country whose language and culture they don't understand," said Mr Foglia. "Whoever these fraudsters are, they obviously misused Switzerland's strong reputation in Asia to lure people to invest their money."

BLOOMBERG