Vantage | What Vietnam's biggest scam ever is all about

In Vietnam, a scam has rocked the nation—the biggest financial fraud in Southeast Asia’s history. It involves a real-estate tycoon, Truong My Lan, who has been convicted of embezzling $12.5 billion and has been awarded the death penalty.

Lan was the chair of VTP Holdings, one of Vietnam’s biggest real estate companies.

They developed high-end properties like luxury apartments, hotels, and even shopping malls. Most of these are in prime locations, like downtown Ho Chi Minh City, Vietnam’s financial hub.

Lan founded the VTP group in 1992, and she had been expanding the business ever since. This real-estate tycoon stole billions of dollars through Saigon Joint Stock Commercial Bank (SCB), a bank that she owned.

This bank was founded in 2012 through the merger of three smaller banks. Lan oversaw this merger and walked away with a part of the bank—almost 90 percent.

Well, Vietnam does have laws to prevent it, so Lan didn’t officially own that much herself. She owned the bank through proxies who helped her indirectly control 90 percent of SCB.

Lan started giving loans to herself indirectly. She got the SCB to issue loans to shadow companies, and those loans eventually found their way to her pocket. She embezzled $12.5 billion this way, but that is not all; Lan also used the bank for other scams. She duped ordinary bank depositors into buying her company’s bonds. They thought they were just depositing their money in the bank.

Instead, their money got tied up with Lan’s VTP group and its proxies.

Eventually, the Vietnamese authorities caught on and arrested Lan in October 2022, but that led to another problem. Everyone knew that Lan controlled SCB. So depositors panicked when they heard about her arrest. It started what is known as a bank run. That is when everyone rushes to withdraw their deposits. The bank did not have all the money required to pay back customers because it had given billions to Lan and her company.

This puts the lives of thousands of ordinary people at risk. People who’d done nothing wrong. They just put their money in the wrong bank. To avoid a disaster, Vietnam’s central bank took over the SCB in October 2022, immediately after Lan’s arrest.

SCB was put under “special scrutiny.” Vietnam’s government, since October 2022, has secretly poured billions into the bank. Almost $24 billion over the last year and a half.

Vietnam did this to protect depositors. SCB was technically borrowing money from Vietnam’s government and using it to pay back innocent depositors when the Vietnam government took over SCB. It gave the bank about $3.7 billion a month, both in October and November 2022. Since then, it has been sending the bank about a billion dollars a month. All of this adds up to almost $24 billion—that is close to 6 percent of Vietnam’s annual economic output or a quarter of the country’s foreign exchange reserves.

There was no public announcement and no information for the taxpayer. It was just a silent rescue operation.

Lan’s was the most high-profile corruption trial in Vietnam’s history, and it ended with her being given the death penalty. It won’t bring back the billions that Vietnam’s government has lost, but they still want her to pay—with her life.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.