Conned by iCon? The cost of one of Thailand’s biggest alleged scams

As The iCon Group scandal reverberates across the country, police have arrested key executives of the company, charging them with committing public fraud and feeding false information into the computer system.

The alleged scam, one of Thailand's biggest, made headlines and was the talk of the town on social media for several days, with many asking if the company had been running a Ponzi scheme.

As of October 19, the Central Investigation Bureau revealed that 4,583 victims had filed complaints in the last 10 days against the company, with damage estimated at 1.4 billion baht.

So far authorities have not accused the company of operating a Ponzi scheme.

Investigation is expected to explore that offense under the so-called emergency decree on borrowings regarded as public cheating and fraud, BE 2527 (1984).

The police arrested 18 executives on October 16, including founder and CEO Warathaphon "Boss Paul" Waratyaworrakul, famous TV host Kan "Boss Kan" Kantathavorn, and two other famous actors.

Police have also frozen assets worth around 125 million baht of iCon’s executives, including bank deposits, and have also confiscated land and luxury cars.

The iCon Group registered its business with the Commerce Ministry in 2018 and a year later it registered with the Office of Consumer Protection Board (OCPB) as a direct marketing business, selling health supplements and cosmetic products.

It was apparent that it had initially sought permission for direct sale from the OCPB but its business did not meet the criterion.

Question of Ponzi scheme

The embattled company’s executives have denied that they had committed public fraud or were operating a Ponzi scheme.

They said they sold products, trained their sales force on how to sell the products online and rewarded those whose performances were outstanding.

But alleged victims of the disguised pyramid scheme argue that they were lured into the operation because they blindly trusted the famous TV host and celebrities.

They accused the company of encouraging them to make relatively large investments of 250,000 baht to buy products from the company for resale and they were encouraged by the iCon bosses to concentrate on recruiting a new team in order to earn money faster.

Many of the complainants said they and their team could not sell the products, so they ended up losing their investment. When they could not sell the products, they said they were asked to pay the company for arranging advertising.

Many left the company after feeling cheated. The company’s products, such as cosmetics, are not of high quality or well known in the market, making it unrealistic to earn money from selling those goods.

They said those who earned money had to invest heavily in employing a new sales team.

Observers believe that the practices of The iCon Group could be deemed to violate the emergency decree on borrowings BE 2527 (1984), or simply known as Ponzi scheme law.

“It is obvious that this is a pyramid scheme,” Asst Prof Santi Chaisrisawatsuk, an economist at the National Institute of Development Administration (NIDA), said.

The details of a company’s revenue will reveal if it is normal or fraudulent.

“If disproportionate revenue comes from money invested by new salespersons, it would be a pyramid scheme,” said Assoc Prof Nada Chunsom, also an economist at NIDA.

Impact of sluggish economy

Is it possible for Thailand to prevent pyramid schemes or other types of financial scams?

It is very hard due to many reasons, said Santi. First and foremost is the prolonged economic slowdown that makes people desperate to find more sources of income, making them vulnerable to making a wrong decision or being lured easily by criminals, Santi explained.

Thailand’s average economic growth rate was below 3 per cent in the past decade, lagging behind other key ASEAN members such as Malaysia, Indonesia, the Philippines and Vietnam.

The trend of slower growth continues due partly to aged society, the country’s declining competitiveness and political instability.

Poor financial literacy to blame

Financial literacy is also an issue. People do not understand the risks of their investment, while scammers develop or use new tools such as online training courses for foreign exchange trade or product sales to disguise their criminal activities.

Information disclosed by companies not publicly listed is retained by the Commerce Ministry’s Department of Business Development, which the public cannot access without paying a fee.

“It is the right time to make information related to financial statements of non-listed companies available to the public,” Nada suggested.

The disclosure would allow people to access company information before they make investments or engage with corporates.

Corruption in the iCon scandal?

Executives of The iCon Group have reportedly claimed that they had paid the police, related regulators and politicians in exchange for protection.

They also paid off extortionists who pretend to be social activists, exposing irregularities in the public and private sectors.

Thailand is known for widespread corruption and wrongdoers who commit crimes with impunity, lamented Assoc Prof Sunti Tirapat, also an economist at NIDA.

“Law enforcement is weak, influential people are often not punished when they commit crimes,” said Sunti.

Mana Nimitmongkol, secretary-general of the Anti-Corruption Organization of Thailand (ACT), shared Sunti’s view, saying the former government as well as the current one led by Paetongtarn Shinawatra have had not shown seriousness in curbing corruption.

iCon’s execs might have violated many laws

Verapat Pariyawong, a lawyer, said executives of The iCon Group might have violated many laws, but they still have a chance to prove their innocence.

Currently, police are accusing them of violating sections 341 and 343 of the Criminal Code regarding public fraud, which carries a prison term of up to five years.

Verapat said they also might have violated the Direct Sale and Direct Marketing Act, BE 2545 (2002).

As per the law:

"Direct Sale means goods or service marketing in the manner of directly offering to the consumers at the residence or the workplace of the consumer or of other person or at a place other than a regular place of business through the direct sale agent or the independent distributor in single-level or multi-level, but excluding juristic act prescribed by Ministerial Regulation;

"Direct marketing means marketing of goods or services in the manner of data communication to offer goods or services directly to the consumer who is far in terms of distance, and expect each consumer to respond to the purchasing of goods or services from such direct marketing business person."

Verapat said that iCon's executives risked violating Section 19, which states:

“No direct sales business person or direct marketing business person shall conduct business in a manner as to solicit a person to join the direct sales or direct marketing networks by agreeing to provide benefits for soliciting other persons to join such a network, which is calculated from the increased number of participants.”

They could also be prosecuted for alleged violation of the Ponzi scheme law — the emergency decree on borrowings regarded as public cheating and fraud, BE 2527), he added.