Saturday, 20 September 2014

The Linktone circular investment scam

MNC Media Investment Ltd (MIH.AX) is a criminal listed investment company that uses a maze of sham transactions with related parties to generate fraudulent results. Formerly known as Linktone (LTON), the company was delisted from NASDAQ in early 2014, purportedly to reduce the costs of SEC reporting obligations. Since Australia is vying to become an international center of fraud and money laundering, Linktone was naturally welcomed with open arms to the ASX. In September 2013, Linktone listed 24m CHESS Depositary Interests (CDIs) under the ticker LTL, corresponding to 240m ordinary shares. Being a revaluation fraud, Linktone CDIs did not actually trade on the ASX, but were merely set at a predetermined "market" price, legitimized and guaranteed by ASIC as unmanipulated. Incorporated in the Cayman Islands, MNC Media Investment conducts its purported business through dozens of interconnected subsidiaries in China, Hong Kong, British Virgin Islands and United Arab Emirates, all buying and selling themselves to each other.

MNC Media Investment has a long proud history of circular sham transactions between related parties. PT Media Nusantara Citra Tbk (MNCN), owned by PT Global Mediacom Tbk, bought 58% of MNC Media Investment in 2008, through its subsidiary MNC International Limited. In 2012, MNC International Limited sold its entire stake to Global Mediacom International Ltd, a wholly-owned subsidiary of the aforementioned PT Global Mediacom Tbk. Global Mediacom, described as "the largest and the only" integrated media group in Indonesia, sold MNC Media Investment to itself.

MNC Media Investment uses euphemistically named "short-term investments" to carry out its fraudulent circular investments, with such "short-term investments" ballooning on its balance sheet from $1m in 2006 to $89m in 2014. In 2010 MNC Media Investment bought $20m of secured notes from PT MNC Sky Vision, a subsidiary of PT Global Mediacom Tbk. In 2011, MNC Media Investment purchased 357m shares of PT Global Mediacom Tbk, which when sold in 2012 resulted in a $28m "profit" listed as "other operating income". MNC Media Investment used the proceeds to purchase 708m shares of PT Bhakti Investama, the holding company of PT Global Mediacom Tbk, 53m shares of PT Media Nusantara Citra Tbk and 65m shares of PT Sky Vision Tbk. These circular "investments" subsequently led to unrealized "profits". MNC Media Investment's cash flow from operations has been steadfastly negative, with $11.3m torched in 2010, $11.9m vaporized in 2011, $5.3m misappropriated in 2012 and $7.1m lost in 2013.

After several months of inactivity, the criminals decided to ramp MNC Media Investment in September 2014, doubling the "market" price in a straightline ramp on little volume.


According to ASIC, this is not a ramp and MNC Media Investment is not a circular investment scam. Instead, this is all a fabulous magic market mystery, and any granny investor that loses money in such a scam has no recourse to the law, but only themselves to blame.
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8 comments:

  1. The Central Scrutinizer24 September 2014 at 11:45

    Here's another one might be worth keeping an eye on - CNX (Carbon Energy Limited). The usual negative earnings, negative cash flow, negative return on equity, & nearly 6x increase in shares outstanding since listing in 2005.

    And today a 300% ramp in share price, based on what I can see is a 23000% increase in 'probable' & 'possible' ie. nothing proven, gas reserves. Plus a recent Singapore 'investor' presentation....

    ReplyDelete
  2. Malcolm McIntyre3 November 2014 at 23:14

    G'day Doc. Ever run across these guys, who have just sent an email to an old address of mine that's now just a legacy postbox? It seems like a Melbourne-Cup-time angle to a continuing scam, don't you reckon?:

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    ReplyDelete
    Replies
    1. Dr Benway4 November 2014 at 06:46

      Hi Malcolm. No, haven't seen this lovely invitation to fund a loan-sharking operation before. So you lend money at 9% to Partner, they lend it out at over 40% in "quick, no credit check loans"? Sounds great.

      Delete
  3. TheForms15 November 2014 at 17:01

    Dr, I know your focus is on LICs but the CBAs Sep 14 quarterly profit result sparked my interest and I wondered if you had an opinion on it.

    As was mentioned in the paper, CBAs result benefited by the decline in doubtful debts for the period.

    So I went and had a look and it seems to me (and I am no expert on banking shares) the entire profit increase was due to the $300mill reduction in doubtful debt expense.

    This reduction of doubtful debts at a time when unemployment is on the up and up seems dubious to me.

    It’s only one quarter, but maybe the 4 pillars run is over!


    ReplyDelete
    Replies
    1. Dr Benway17 November 2014 at 06:50

      Hi TheForms, hope you are well. The scam of banking is a much simpler form of fraud - creating money from nothing and lending at interest - although you are absolutely right that jimmying with various non-cash accounting measures can shift these institutions' profits at will. The story of how our financial and economic system has declined into a debt-based ponzi goes as follows:

      Society realized it could move the major determinant of 'wealth', namely property prices, by policy using rates and taxation law. Ramping property prices also ramp stock prices as the banks both constitute the stock market and control it. But everyone has to pretend that property is solely priced by a dispassionate market. Society then created a several decade property boom, institutionalizing the idea that property prices increase faster than inflation/rents/income. The longterm expected capital gain priced into the property market is now far above expected increases in rents/income, an impossible expectation to reconcile. The current horde of loss-making property "investors" prove that. As a result, if you buy property today, half the price you pay is for the actual property, with the other half of the price paid for expected unsustainable future capital gains. If people could buy property, while contracting away future capital gains in excess of increases in rents, they would be willing to pay significantly less for the property.

      Here are a couple of very simple questions you never hear the banks/rba/gov/shills answer, much less pose:

      1. What is the longterm capital gain priced into current property prices? 2. What proportion of current property prices are based on the above expectation?

      Good luck in getting anybody to ever answer these two simple questions. The honest answer would be maybe 7% and 50%, respectively.

      Delete
  4. TheForms17 November 2014 at 10:58

    Thanks Dr for your reply.

    Yes, banking is a scam.

    It boggles the mind when one small group in society have been given a legal right to type abstract numbers into a computer, at no cost, call it money, hand it to someone else at interest, who then have a claim on real goods and services in the world.

    This is an affront to everyone who gets up in the morning and actually works for their money.

    Talking about inflated house prices, take a look at the last 2 yr run up in Sydney house prices:

    http://www.rba.gov.au/chart-pack/household-sector.html

    The chart looks like one of those LICs ramps you display here from time to time.

    My thinking is this rightfully has to end and maybe with the banks resorting to accounting gimmicks just to show a profit is a sign of that end.


    ReplyDelete
    Replies
    1. The Central Scrutinizer2 December 2014 at 00:17

      You might find this informative:

      http://www.rba.gov.au/mkt-operations/dom-mkt-oper.html#tiotb3ls

      Of particular interest is the RBA's 'committed liquidity facility', whereby the RBA magically transforms whatever shit is on the books of the commercial banks into HQLA, that is cough - high quality liquid assets- cough...cough...

      How this 'committed liquidity facility' is any different from the RBA's Open Market Operations, is not readily discernible since the RBA monetises whatever shit (mostly mortgage debt) is on the books of the commercial banks through that avenue anyhow, but it apparently meets Basel III 'liquidity standards'.

      The end result however can be seen if you look at the exchange settlement balances of the commercial banks. There is no need to wonder about the 'profit' being reported by these banks.

      Delete

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