In recent times, the Royal Monetary Authority has been resolute in issuing multiple warnings to the public regarding Ponzi schemes or investment scams that continue to plague our society. Despite these cautionary measures, a certain segment of our population remains susceptible to the manipulative tactics of a select few. Tragically, by the time individuals realize they have fallen victim to a scam, their hard-earned money has vanished into thin air, leaving them to endure irrecoverable economic losses. Rumors abound that innocent and trusting individuals in these communities have become entangled in an investment scheme that exhibits the telltale signs of a serious Ponzi scheme or scam.

A WeChat Audio message circulated on social media, igniting a heated debate on one such scam in a small village in Trongsa. While some individuals work diligently to protect their fellow villagers from participating in the investment scheme, others staunchly defend its alleged legality, despite its lack of government licensing. One of the women thought to be in the controversy claims that she would willingly pay taxes if required, implying that she perceives her actions as permissible. She accuses those questioning the scheme of harboring envy toward her financial gains. She asserts that participation in the investment scheme was purely voluntary, absolving herself and others involved of any allegations of coercion or force. However, the absence of coercion does not negate the potential risks faced by participants, nor does it mitigate the legal implications of operating outside the established regulatory framework.

Firstly, according to established legal principles, such unauthorized investments are deemed fraudulent. The Income Tax Act clearly stipulates that individuals earning an income of Nu 300,000 or more within a fiscal year are obligated to file an income tax return. For registered business entities, a business tax income tax return must also be submitted. Failure to comply with these tax obligations is a violation of the law. Furthermore, engaging in any form of business activity necessitates registration with the relevant authorities. The Financial Services Act prohibits unregulated investment businesses due to the inherent risks associated with investments, including market risks.

Engaging in such illicit business activities entails a multitude of illegal acts that must not be overlooked. Firstly, operating a business without the requisite license flagrantly violates established trade rules and regulations. The absence of proper authorization serves as evidence of non-compliance with the necessary legal framework. Secondly, the perpetration of fraudulent activities such as Ponzi schemes is considered a criminal offense, punishable by imprisonment under the Penal Code of Bhutan.

Thirdly, the absence of registration for these schemes amounts to potential tax fraud or tax evasion for failing to file the Personal Income Tax, even if it is not licensed, which is punishable by years of imprisonment. Fourthly, when these investment schemes are falsely advertised or presented as risk-free, they violate the Consumer Act of Bhutan as it amounts to misrepresentation, fraud, and deception. The Contract Act of Bhutan renders such investment agreements void since they are against existing laws, policies, and constitute fraud or misrepresentation.

Therefore, conducting such business under the guise of investment is clear evidence of serious criminal offenses and attracts numerous civil damages. The state must employ all necessary measures to prevent and punish such schemes with rigorous efforts as it impacts the most vulnerable and poor people. The RMA should open an online report system with incentives to track down such scams.

Sonam Tshering

Lawyer, Thimphu

Disclaimer: The views expressed in this article are author’s own.