In 2021, Nguyen Thi Thanh Thuy jumped at an offer by Vietnam’s Saigon Joint Stock Commercial Bank (SCB) to invest in a new savings product offering high interest rates. The former factory worker did not hesitate to move her entire savings of 800mn dong ($32,000) to the new scheme, believing that her money would be safe with the state-licensed bank.
But unbeknown to Thuy, her money was invested in bonds that Vietnamese authorities said were illegally channelling money to property tycoon Truong My Lan in what they said was the biggest fraud the country had ever seen.
“I believed totally in the assurances of the bank staff . . . now I have lost all faith in the domestic banking system,” said 61-year-old Thuy, adding that all her family’s savings had been lost. She has been participating in protests against SCB — rare in tightly controlled communist-run Vietnam — because “we have no other choice”.
Thuy is one of thousands of Vietnamese people who have lost money they put in SCB. Lan is accused of embezzling 304tn dong from SCB through family and proxies, using “ghost” companies to take out loans and bribing central bank officials with millions of dollars stuffed in styrofoam boxes.
Lan’s trial — on charges of embezzlement, bribery and abuse of power — began this month and is part of a years-long corruption purge by Vietnam’s Communist party that has exposed widespread graft, slowed economic activity and threatens to upset record amounts of foreign investment. Prosecutors on Tuesday called for a death sentence for Lan.
Vietnam has been plagued by corruption for decades, but the “scale of the case is shocking”, said Linh Nguyen, associate director at consultancy Control Risks. “It has damaged the sentiment of not only foreign investors, but also local investors in the stock market and the business community in general.” The alleged fraud amount is almost three times that involving Malaysia’s sovereign wealth fund 1MDB, which US officials have described as the world’s largest incident of kleptocracy.
Lan’s trial comes at a time when Vietnam has emerged as a preferred destination for manufacturers looking to diversify beyond China amid rising tensions between Washington and Beijing. Foreign direct investment in Vietnam rose by nearly a third to a record high of $36.6bn last year.
Some potential investors are worried the corruption crackdown — known as “blazing furnace” — could pick up pace, especially closer to 2026, when the Communist party leader Nguyen Phu Trong, who has spearheaded the campaign, is widely expected to step down. “Some of our clients are eager to make investments in Vietnam, but for now they are holding back as they want to see what’s going to happen at the next party congress and whether this anti-corruption drive will continue,” Linh said.
In another sign of diminishing investor confidence, the ratio of realised to registered foreign direct investment declined in 2023 from a year ago, according to Linh and analysts at ANZ Research.
The alleged multibillion-dollar fraud at SCB, which has been under “special control” of the central bank since Lan’s arrest in 2022, triggered a downturn in Vietnam’s property and corporate bond markets. As a result of the broader crackdown on graft, Vietnam’s president and two deputy prime ministers resigned in 2023 and hundreds of high-ranking officials have been arrested over the years.
Lan, 67, comes from one of Vietnam’s wealthiest families, which made their money mostly in real estate. She is the chair of developer Van Thinh Phat, which owns some of the most prized hotels, luxury residences and office buildings in Ho Chi Minh City, Vietnam’s economic and commercial hub.
According to charges detailed by Vietnamese state media, Lan controlled more than 90 per cent of SCB illegally through proxies, appointed family members to senior positions to help funnel money to her and bribed state auditors who had discovered the alleged fraud.
Authorities said SCB also gave loans worth more than $44bn to Van Thinh Phat and other companies controlled by Lan between 2012 and 2022, accounting for 93 per cent of the total loans disbursed by the bank.
At her trial, Lan denied owning a controlling stake as well as all the other charges against her. The tycoon said she was asked by the central bank to oversee a merger of three banks that resulted in the establishment of SCB and that she had persuaded her friends to buy shares to save the bank from bankruptcy, state media reported.
Lan’s lawyers declined to comment. Vietnam’s Prime Minister Pham Minh Chinh has blamed the country’s finance ministry, securities regulator and central bank for their lack of oversight, according to state media. The foreign ministry, which handles questions to the government from foreign media, and Lan’s property company Van Thinh Phat did not respond to requests for comment.
In light of the crackdown, government officials are reluctant to approve some projects for fear of future investigations. As a result, Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute, said Vietnam was in “bureaucratic paralysis”.
Critics said Trong, the leader of Vietnam’s Communist party, had used the campaign to go after political rivals, heightening the sense of unpredictability. “The campaign that the government has undertaken is not simply to eradicate corruption,” said Darren Tay, head of Asia country risk at BMI, a unit of Fitch Solutions. “There is also a political element. Trong has taken the opportunity to highlight the wrongdoings of his political rivals.”
But Tay said Vietnam remained attractive for foreign companies. “Vietnam has ensured that it remains welcoming to foreign investors. The economy is set up to favour exporters and manufacturers,” he said, pointing to low interest rates and wages and government incentives to set up factories.
For SCB depositors such as Thuy, neither foreign investment nor the court verdict matters. She wants the government to use the property tycoon’s assets to compensate victims. “I will take to the streets to protest until we recover our money,” she said.
