Operating a Fake Bank

Here's a story of a fake bank in China -- a real bank, not an online bank -- that stole $32m from depositors over a year. Pro tip: real banks never offer 2%/week interest.

Posted on January 30, 2015 at 6:49 AM • 19 Comments

Comments

R ForemanJanuary 30, 2015 8:04 AM

You should've seen some of the stories that came out subsequent to the 2008 bailouts.. makes a $32 million theft seem like childs play. They don't call this a kleptocracy for nothing. Professor William Black (Kansas State, Missouri) wrote a book entitled "The Best Way to Rob a Bank Is To Own One".

DaveJanuary 30, 2015 10:04 AM

Also, real investment firms don't get a consistent double-digit annual returns, contrary to what those nice folks at Madoff Investment Securities said.

Clive RobinsonJanuary 30, 2015 11:58 AM

With regards paying high interest rates should be a warning, there is a bit to the Bernnie Madoff story that some people missed...

One of the reasons Madoff was able to operate the scam as long as he did, was the fact he actually paid the rates he claimed to some of the investors who changed their minds and wanted to leave his schemes and gave them their capital back.

As with all such schemes there are usually some winners. Thus if you are early in and can get an early out, you get the rate promised and your capital. And as you spread the good news more people get suckered in... and get fleeced to pay the next round of early withdrawals.

Thus by far the majority of people get fleeced with just the principles and first out investors making anything out of it.

cyriousJanuary 30, 2015 12:54 PM

How about a bank that is real for some but fake for others? Who is the "red team" looking for possible avenues for fraud, or are they sleeping with the fishies?

albertJanuary 30, 2015 1:20 PM

The article said:

"...One businessman from Hangzhou, Zhejiang province, deposited 12 million dollars from his company, but stopped receiving interest for the money after just four weeks...."
.
Looks like the 'bankers' didn't apply Madoffs rules. All they needed was an 'early withdrawal' penalty (say, a percent of interest paid out), and a 'full refund' policy. They'd probably be operating today. How smart is it to refuse a $12M refund, out of $253M? Stupid. The trick with Ponzi schemes is to know when to get out.
.
Greed cuts both ways (except for real banks of course).
.
I gotta go...

Dirk PraetJanuary 30, 2015 1:55 PM

What I can't wrap my head around is the retard who deposited no less than 12 million dollars from his company in a bank he'd never heard of. I mean, WTF ?

NobodySpecialJanuary 30, 2015 2:30 PM

Millions of British savers, quite a few govt departments and lots of schools, charities, city councils deposited billions in savings in Icelandic banks they had never heard of - on the assumption that a modern european state would guarantee their national banks.

BenJanuary 30, 2015 4:15 PM

@Clive, most Ponzi scheme investors these days don't actually lose money, or very little.

The Feds unwind the scheme and take back the profit paid out to earlier investors, and distribute it fairly. ("unjust enrichment" is a civil claim in the UK but I don't know if that's what they use).

sammyJanuary 30, 2015 6:39 PM

@ Clive Robinson

Madoffs only got caught because subprime crisis wiped out their gambles. Some had argued TARP could have bailed Madoffs out, as it did for major banks, but that could only be true if the Madoffs were to gamble proportionately as they have done prior to crisis.


Michael.January 30, 2015 8:02 PM

@NobodySpecial
Guarantee to how much though? If you put millions of dollars in an account in Australia (or even, I think, in the same financial institution), and that institution goes bankrupt, the government will guarantee your deposit. To a maximum of $250000. Works for me.

CallMeLateForSupperJanuary 31, 2015 10:06 AM

@Dirk Praet

I know... it boggles the mind, to the degree "WTF?!"... to us. But when we recall that the country in question is relatively new to capitalism's caveats, pitfalls and nuances (to put it kindly), and also recall that that country's manufactured exports have included such WFF! items as antifreeze toothpaste and lead-paint-decorated toys for children, it becomes clear that said country does not yet "run with the big dogs" of capitalism. It has learned to stand and to walk. The same is true of investing and investers. They have come far, and they have a long way to go. I think China will get there in time.

Until then, I will continue to use footwear (Genesco; Florsheim; Frye) that I bought in the 60's and 70's. :-)

albertJanuary 31, 2015 12:25 PM

@That Anonymous Coward
I see China as the Great Experiment. If they can avoid Western Capitalism, they will succeed. Will they learn from history? Time will tell.
.
BTW,
1HKD = 0.13USD
12M = 1.56M US
253M = 32.89M US
.
Still not chump change...
...

WaelFebruary 1, 2015 12:51 AM

@CallMeLateForSupper,

lead-paint-decorated toys for children,

Which is better, lead-paint-decorated toys, or
this ?

FranceFebruary 1, 2015 4:06 AM

Michael.: "Guarantee to how much though? If you put millions of dollars in an account in Australia (or even, I think, in the same financial institution), and that institution goes bankrupt, the government will guarantee your deposit. To a maximum of $250000. Works for me."

Except that there is a max cap on the funds on which that guarantee is based on. For France, see http://www.garantiedesdepots.fr/spip/spip.php?article6&id_rubrique=6#G it is 3 billions.

CallMeLateForSupperFebruary 1, 2015 9:51 AM

@Wael Re: grater slide vs lead-paint-decorated toys

Can't say; there are too many possible definitions of "better".

(I had not seen that... er ... neat grater slide before.)

WaelFebruary 1, 2015 10:12 AM

@CallMeLateForSupper,

Can't say

Okay, it was recalled because someone leaked the specifications: "The slide is made out of 45% lead and uses mercury for a lubricant!" Would that sway your opinion?

SkecGiDribeypFebruary 4, 2015 1:43 PM

How can you know if the money (deposited) itself was fake money or real?

Pro tip:
If there is a third party (e.g. the state) who has the means to return the losses, that party is the counterfeiter. Otherwise you just loose the money.

Leave a comment

Allowed HTML: <a href="URL"> • <em> <cite> <i> • <strong> <b> • <sub> <sup> • <ul> <ol> <li> • <blockquote> <pre>

Photo of Bruce Schneier by Per Ervland.

Schneier on Security is a personal website. Opinions expressed are not necessarily those of IBM Resilient.