A Socio-legal Study in the Cambodian Ponzi Scheme: With Reference to Japan and the United States
| Published date | 01 October 2023 |
| DOI | http://doi.org/10.1177/25166069231180018 |
| Author | Soush Mony Odham |
| Date | 01 October 2023 |
| Subject Matter | Original Articles |
A Socio-legal Study
in the Cambodian
Ponzi Scheme: With
Reference to Japan
and the United States
Soush Mony Odham1
Abstract
This article recommends establishing an investment fraud investigation, a
Customer Consultant Agency and a Victim’s Fund Recovery Team to address
the problem of the Ponzi scheme in Cambodia. Furthermore, the paper also
details how the enactment and law reform prevent customers or investors from
becoming the scheme victims and improve prevention, detection, prosecution
and fund recovery through the analysis of case studies. This paper focuses on
domestic laws and supports that Cambodia should follow the US and Japan sys-
tems to counter the Ponzi scheme. This problem should be addressed through
international cooperation in a strategic partnership way.
Keyword
Investment fraud, multilevel marketing, Ponzi scheme, Pyramid scheme
Introduction
The relationship between citizens and government in preventing and deterring
increasing growth in consumer fraud and investment fraud is always crucial in
minimizing the number of these frauds. In the 2020 report of the Federal Trade
Commission (FTC), the United States received 2.2 million reports of consumer
Original Article
Journal of Victimology
and Victim Justice
6(2) 176–207, 2023
2023 National Law
University Delhi
Article reuse guidelines:
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DOI: 10.1177/25166069231180018
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1
Graduate School of Law, Nagoya University, Japan
Corresponding author:
Soush Mony Odham, Graduate School of Law, Nagoya University, Japan.
E-mail: soushmonyodham@gmail.com
Odham 177
fraud.2 In this report, consumers reported a $3.3 billion loss to consumer fraud in
2020, increasing from $1.8 billion in 2019. Investment-related frauds, business
and job opportunities, and counterfeit check scams are the top three reported
frauds with a high median of individual losses of $1,566, $1,950 and $1,980 per
individual.3 Therefore, governments and regulators should strongly emphasize
investment-related frauds, particularly Ponzi schemes.
Problem Statement
Ponzi scheme is one of the investment-related frauds. The Ponzi schemes’ dam-
age has caused critical problems in Cambodia, Japan and the United States Almost
every year, many such frauds surface, and this fraud is associated with a large
number of victims, great value of loss (millions and sometimes billions of USD)
and high frequency of the crime.
One of the biggest Ponzi schemes ran for three years between 2013 and 2015
in Cambodia, linked with an estimated 50,000 victims.4 This case total loss was
estimated at around $400 million and ran three institutions, namely, Empire Big
Capital (EBC), ASEAN Instrument Foundation (AIF) and Investment
Consultant Association.5 This joint Ponzi scheme deceived people of all
backgrounds across Cambodia since the con-artist’s distribution of 10% monthly
return is eye-catching for everyone. In the United States, Bernie Madoff plotted
the world’s largest Ponzi scheme that lasted from 1980 to 2008 and affected
over 39,000 victims from 125 countries.6 These victims lost $65 billion, including
fake profits.
Ponzi schemes happen every year in the United States; in 2019, the state and
the federal government exposed 60 schemes considered Ponzi schemes and linked
with $3.25 billion of investment funds.7 The frequency of Ponzi schemes has
created a serious legal issue for the government to propose and adopt appropriate
2 Federal Trade Commission, New Data Shows FTC Received 2.2 Million Fraud Reports from
Consumers in 2020, February 4, 2021, accessed March 11, 2022, https://www.ftc.gov/news- events/
news/press-releases/2021/02/new-data-shows-ftc-received-22-million-fraud-reports-consumers-2020
3 Federal Trade Commission, Consumer Sentinel Network, 2020, January 2021, accessed March 11, 2022,
https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2020/
csn_annual_data_book_2020.pdf
4 Kimsay Buth, Ministries Announce New Investigation into Ponzi Scheme, , May
31, 2017, accessed March 11, 2022, https://english.cambodiadaily.com/news/ministries-announce-
new-investigation-into-ponzi-scheme-130758
5 Meta Kong, Number of Plaintiffs in Empire Big Capital Fraud Suit up to 900,
, January 8, 2018, accessed March 11, 2022, https://www.phnompenhpost.com/national/
number-plaintiffs- empire-big-capital-fraud-suit-900
6 Steinber Marty & Scott Cohn, Bernie Madoff, Mastermind of the Nation’s Biggest Investment
Fraud, Dies at 82, April 14, 2021, accessed June 23, 2022, https://www.cnbc.com/2021/04/14/bernie-
madoff-dies- mastermind-of-the-nations-biggest-investment-fraud-was-82.html
7 Lacurci Greg, Ponzi Schemes Hit Highest Level in a Decade, Hinting next ‘Investor Massacre’ May
Be Near, CNBC, February 11, 2020, accessed March 14, 2022, https://www.cnbc.com/2020/02/11/
ponzi- schemes-hit-the-highest-level-in-10-years.html
178 Journal of Victimology and Victim Justice 6(2)
and necessary laws and protective mechanisms to prevent investors and citizens
from falling into these schemes. Since there are numerous Ponzi schemes in the
market and investment opportunities, the relationship between government action
and citizens is obligatory to prevent the Ponzi scheme from happening and solve
the problem when the citizens fall into the scheme.
This paper focuses on domestic laws and analyses three cases of Ponzi schemes
that happened in Cambodia, Japan and the United States to compare socio-legal
differences and recommend better and more effective approaches to laws and
protective mechanisms for Cambodia.
Research Questions
The continuation of the surge in Ponzi schemes associated with the government
fails to find an effective solution because fraudsters utilize different and innova-
tive swindling methods with a concrete plan of comprehensive understanding
of victims’ backgrounds, weaknesses of the legal system and protective mecha-
nism of the government. Financial fraud victims experience financial loss and
emotional problems such as severe stress, anxiety, depression and non-financial
consequences.8
Ponzi scheme has become one of the global financial issues, and this issue has
been drastically rising in the last decades.9 The government and authorities
are seriously concerned that more people could become victims of this fraud.
Even though the United States, Japan and Cambodia’s governments have taken
various actions ranging from laws to prevent Ponzi schemes, investigation
initiatives and educational campaigns that purposely advocate for citizens to
understand this fraud scheme, and better fund recovery initiatives, the Ponzi
scheme remains one of the most significant financial crimes in every country.
Among the three comparative countries, the United States and Japan have better-
existing laws and protective mechanisms and better results in responding to the
Ponzi scheme. This study supports that Cambodia should learn protective
mechanisms and laws from these two countries to protect citizens from the Ponzi
scheme. This paper answers the following research questions:
1. What laws and protective mechanisms should be in place to prevent citi-
zen from Ponzi scheme in Cambodia?
2. What are the problems with financial laws training for executives, courts
and securities regulators in Ponzi scheme detection, prosecution and
justice?
3. When Ponzi scheme happens, should Ponzi scheme fraudsters be punished
based on financial laws?
8 The Non-traditional Costs of Financial Fraud, March 2015, accessed March 15, 2022, https://www.
finrafoundation.org/sites/finrafoundation/files/non-traditional-costs-finanCial-fraud.pdf
9 Kadoya Yoshihiko et al., Who Is Next? A Study on Victims of Financial Fraud in Japan,
. (2021), https://doi.org/10.3389/fpsyg.2021.649565
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