Tan Hoang Minh's 10,000 billion case, the fear of appropriating money from corporate bonds

"A fire reveals the rats"

On April 5, 2022, the Ministry of Public Security's Investigation Police Agency prosecuted and temporarily detained Mr. Do Anh Dung, Chairman of Tan Hoang Minh Group, and his accomplices for the crime of "Fraudulent appropriation of property".

Initial investigation results show that from July 2021 to March 2022, Mr. Do Anh Dung and individuals at Tan Hoang Minh Group committed fraud, using 3 member companies and related companies to issue 9 corporate bonds in violation of the law, worth 10,300 billion VND. This was to mobilize money from investors but not use it for business activities according to the bond issuance documents.

Illustration photo. Photo: Internet

In this case, the investigation agency will have to continue to clarify the amount of capital mobilized, what the defendants illegally used it for, where this money is, and what types of assets it has been converted into.

Previously, at the end of 2021, the State Securities Commission (SSC) inspected the issuance of corporate bonds of VsetGroup Corporation (107 Cong Hoa, Ward 12, Tan Binh District, Ho Chi Minh City) and found unusual signs, posing potential risks to investors.

Specifically, VsetGroup signed 678 bond purchase and sale contracts from January 1, 2020 to October 27, 2021, with a total value of more than VND 208.6 billion, but did not provide the signed contracts as requested by the inspection team. Along with that, VsetGroup could not provide records and documents related to the use of the proceeds from bond issuance.

In particular, VsetGroup did not monitor and account for the amounts collected from bond issuance, bond interest payments, and bond principal payments on the Financial Statements as of December 31, 2020 and June 30, 2021. Not only that, the amounts collected from bond issuance were also withdrawn by individuals from the company's accounts and were not fully credited to the fund and were not tracked on the company's accounting books.

Experts have warned that to mobilize capital through banks, enterprises must have collateral, must have effective projects and business plans, and must be subject to strict supervision of disbursement... Meanwhile, issuing individual corporate bonds does not require collateral or guarantees. How the proceeds are used, whether they are for the right purpose or not, is entirely up to the enterprise to decide, without supervision. The issuance conditions are easy and uncontrolled, so using capital from issuing corporate bonds for other purposes is inevitable.

Loss of faith

Recently, many enterprises have been promoting the issuance of bonds with large values. Many people have asked the question, after successfully mobilizing such huge amounts of money, how do enterprises use it, is it in accordance with the purpose of issuance or not?

In the real estate sector, at a recent investment forum, an expert shared a story: there was a company that mobilized several thousand billion VND in bonds, but only a few hundred billion VND was disbursed for the right purpose of providing for the project, the rest was used to pay off bank loans, buy agricultural land projects... and then recorded losses.

Economist Pham Nam Kim said that, like China, in the real estate sector in Vietnam, there are many enterprises "inflating prices" and "drawing" projects. There are enterprises that raise capital of thousands of billions of dong through bonds but only spend a few hundred billion on projects, the rest is to pay debts and invest in other things... and it is not excluded that there are also some personal benefits.

Therefore, in early September 2021, the Ministry of Finance issued a document directing the State Securities Commission to step up inspection, examination and supervision of the issuance and provision of corporate bond services. The Ministry emphasized: "Focus on reviewing and detecting enterprises with signs of violating and circumventing legal regulations in the issuance of corporate bonds. In case of detecting fraudulent acts or signs of appropriating investors' assets, promptly transfer them to the police for handling in accordance with the law."

In early December 2021, the Government Office issued Official Dispatch No. 8857/CD-VPCP on strengthening the management, inspection and examination of corporate bond issuance, including directing the Ministry of Public Security to coordinate with relevant agencies to grasp the situation, receive information and cases with signs of law violations (if any), to strictly handle them in accordance with regulations.

The inspection and examination have discovered irregularities in bond-issuing enterprises, of which Tan Hoang Minh is an example. If the inspection and examination activities are intensified, there will certainly be many more violations from the issuance of corporate bonds in the past exposed. The question is, after Tan Hoang Minh, which enterprises will be named?

However, there are concerns that the more negative things are discovered, the more it will affect the corporate bond market. The more cases of misappropriation or fraud of investors are discovered, the more fear can spread and cause confidence in the corporate bond market to decline seriously.