A Very Sad, Sad Tale KKM

[Markit]

Did a search for the term KKM in the forum today and to my surprise there has been no mention of one of the biggest events to happen in Bali in many a year that will, undoubtedly, influence the lives of many thousands of Balinese for years and years to come. And that, unfortunately, in a very negative manner.

For those that haven't yet heard of it KKM is, or better said was, the firm:
Koperasi Karangasem Membangun
Sudirman Street No 1
Amlapura, Bali, Indonesia

They were a mixture of mail order, credit unioun, speciality shoping center, bank and investment house. They had been in business for about 3 years the best I can find out - but, information is conflicting as they have changed business form several times and basically their present business model emerged about 3 years ago. The attraction was that you could bring your money to them (I'm told minimum investment was 1 million Rupiah) and they would invest it for you and return within 3 months your investment plus 50%.

Beginning to sound familiar? (do the names Madoff, Stanford or Ponzi ring any bells).

I first heard of the firm a month ago or so and that same afternoon my friend told me that they had been closed down by the police and that there were mass demonstrations in Amlapura from the people who had invested money to have them re-opened. Understandably they wanted their money back! These demos have gone on regularly since then with every more optimistic statements from the authorities and heavier usage of the police to keep the peace. At this stage no one really believes that they will get their money back but the powers that be seem to be keeping the hopes alive at least until after the elections are over.

The truly tragic thing here is that the Balinese are able to still smile and in many cases actually laugh about loses that represent many years of earnings and in many cases the loss of borrowed money that they really have no hope of ever paying back. We aren't talking small sums here by any means; I personally know of a tourist guide that borrowed 200 million against his future earnings, house and family property to invest and was then locked up for demonstrating (and throwing bricks at the mayor's house) when KKM was eventually closed up.

I am truly surprised that nothing has been written here about something that affects many thousands of Balinese from all parts of the island - just ask anyone about KKM and you will hear tales of terrible loss and tragedy given with that sparkling Balinese smile - most of them are true :cry:

 

[troy]

The likely reason it has not been mentioned is that these scams are all over Indonesia, and while illegal, many play them with full knowledge that at some point they'll go bust. But many know if they get out early enough they may get their promised returns that were som other poor sods principle. I forget the names of the larger ones, but they're out there and still active.

I must say, throwing a brick at the mayor's house hardly seems like a wise or justified action. Gambler beware - why not throw a brick at a random pedestrian while you're at it?

Troy F.

 

[Alexandre]

yes, we had the same game in the UK, people buying houses and speculating on ever inflating prices and always finding a sucker to pass on the hot potato, it's called the greater fool theory. Only people are to blame, nobody forces them to make these decisions. Only greed is to blame.

 

[ronb]

The likely reason it has not been mentioned is that these scams are all over Indonesia, and while illegal, many play them with full knowledge that at some point they'll go bust. But many know if they get out early enough they may get their promised returns that were som other poor sods principle. I forget the names of the larger ones, but they're out there and still active.

I am not so sure that there are as many scams as you suggest.

Using Jakarta Post as a guide, they have covered the KKM affair intensively with 13 articles from Feb 23 (the day after the police acted I think) up until Mar 11.

Searching their archives over the past 5 years for "ponzi" turns up these KKM articles plus only 2 more. On May 10, 2007 they reported "Indonesia a paradise for investment fraud" It says in part:

"Indonesia has become a haven for investment frauds because of the lack of knowledge and education of investors. Such frauds also happen in developed countries, but not to such a fantastic degree," Lin Che Wei, the president director of state-owned equity house Danareksa, said Wednesday in Jakarta.

Che Wei was referring to the US$385 million (about Rp 3.5 trillion) paid over by some 10,000 investors to Dressel through its Indonesian partner, PT Wahana Bersama Globalindo (WBG), which has now been lost after the company suddenly closed up shop on March 1.

And another article on Nov 25, 2008 headed "Beware of fraudulent investment" It starts by saying:

Fraudulent investment schemes remain lucrative in Indonesia. Many Indonesians (even highly educated elites) have become easy victims, they know thousands who may have been victims and the national media has often reported such scams.

But it seems to be referring to the Dressel affair above and adds no new information.

So the KKM affair would seem (from a Jakarta Post viewpoint) to be the first local operation with a shopfront that was building a local reputation by word of mouth.

 

[gilbert de jong]

Hi y'all,

It's not when you get out, at those games(not refering to KKM)but to the pyramid setup,
which is common on Bali, it's about when you get in.
There are alot of 'banks' like the KKM, I however do not know if they work on the same principle as that KKM. If I have understand my neighboor correct, the people who use these Koperasi Banks, are people who do not have a regular bankaccount, regular as in with Mandiri, BCA, etcetc...He also said that it's mostly used by "poor" people. It's also very easy to start up such a koperasi bank, and he doesn't trust any of them.
My personal opinion about that KKM, which is probably owned by a Balinese(?)..That guy who's responsible should be hanged by the balls from a palmtree, for the simple reason to make him feel what's it like if "someone has you by the balls"..as he is responsible for alot of heartache to the already poor Bali-people, Maybe it bit harsh, but suitable for the crime commited.
For blaming the people who believed this scam, as Alexandre suggest. Is in my mind ludacris, since the majority of the Balinese people I've met are very trusting and gullable. Maybe some educated people have been trapped too, but people here never heard of 'Streetsmart'...yeah some have and are refered to as the beachmaa-fya, and these people would never believe a return investment + 50%. At leat not the ones I know.
But the world will keep turning, and there are alot of sad sad story's, this one is now part of Bali's infortunate past. I am just hoping the Balinese people will learn from mistakes made, so no other will make the same mistake again....
Friendly greetings, Gilbert.

 

[Markit]

Hi Troy, I don't know about all of Indonesia but in my experience these schemes seem to be all over the world - all the time. And they are not limited to developing countries or even to dumb people. I doubt that the billions that landed in Mr. Madoff's bank koffers were earned initially but "stupid" people or invested through ignorance. It seems to be pure greed and hope that are driving these schemes.

The question I would love to have answered is the following: A Balinese friend told me about this company as we drove by it in Amlapura and explained what it did. The reason for my particular interest is that the KKM building was the newest, most impressive and most modern building that I had seen here in Bali at that time. When he finished explaining what went on there I told him immediately not to touch it with a barge pole. That same afternoon it was closed up by the police after a run of over 3 years. Now to the question: If a stupid Bule knows that this is a ponzi scheme in the first 5 minutes of hearing about it, where were the authorities that are paid to protect its citizenry?

Alexandria to equate the housing bubble to a ponzi scheme seems a little harsh towards all those people that bought houses cause they need to get out of the cold rain and keep their feet warm :lol:

 

[troy]

Ron, I don't quite understand your post. You suggest it's not as widespread as I suggest but the rest of your post supports what I stated.

I'm sitting in a house right now in JKT and speaking to a friend who is telling me the neighbour used to run such an operation. Thousands upon thousands of them exist, and likely don't show up on the radar because they weren't bought into by the elite.

They exist everywhere yes - but I've yet to see it at such a retail and consumer level as it exists here in Indonesia.

I feel for those effected - it is tragic.

Markit, you're question, "how can I figure it out in 5 minutes?". Well it's like this. If you go into a village in Indonesia (not just villages mind you), many people work as "rain stoppers" - builders even call them to stop the rain before a pour of concrete. Stupidity has a way of persisting. It has persisted for centuries.

Troy F.

 

[froggy]

I went into one of these scams, but I knew it was early, I made out like a bandit because I took my profits, most people just "let it ride" .. It was one of the largest in the U.S called 12 daily pro, I was lucky, I got out 2 weeks before it all went to hell, lucky timing?. Some people make a living off getting in early in these scams and making a few turns and getting out, its sort of an art form...... hell there are even websites that teach you tips on how to get nto scams and get out,,,,, its all a gamble and the ignorant always loose.

 

[Alexandre]

froggy, bragging about ripping off others is very sad. Running like a bandit is exactly what you did. Make sure you don't get caught as participating to and making money out of a ponzi scheme is a criminal offence. Check the law in the US.

 

[froggy]

They had over 350,000 people on this one, the only one I ever joined,good luck prosecuting any "members", they nailed the person that organized it, I think 40 million dollars was floating around afer all was said and done. Not Bragging,I was lucky I got out, as far as ripping people off, please, they knew or should have known the risk of losing it all, if not it will be a lesson, like enron, stock market losses etc., lessons in life stick to you if you have sweat equity or cold cash losses involved. I do feel for anyone that had any hardship and used money they couldnt afford to lose.

 

[ronb]

Ron, I don't quite understand your post. You suggest it's not as widespread as I suggest but the rest of your post supports what I stated.

My point was that in 5 years of Jakarta Post reports, 13 of the 15 articles were about KKM. So if its as widespread as you suggest, then Jakarta Post has not been reporting most the others.

 

[Anton]

You have to take your hat off to this Mr. Madoff he was audacious to say the least and with many of his victims being probably very successful in picking other peoples pockets they too had thier pockets picked kind of like a modern day robin hood gone over to the darkside :shock:
Greed is good isnt it ! Well having lots of money is good surely even if you got it the easy way its still good isnt it !Somebody found a way of making vast amounts of money and took up that opportunity human nature isnt it ! The biggest problem for most affluent nations is the unlimited supply of other peoples money and now available at bargain basement prices even the governments are now borrowing big time with other peoples money ( public purse ) buying up all the worlds ponzi schemes then hoping to flog them off under the guise of a reputable government auction ( toxic assetts )so another scam but this scam is government run so it must be safe ! So where are we now :?
Are government bailouts legal :?:
I didnt pay my taxes to bail out the Mr. Madoff of this world but thats where my dollars are going NOW have i been the victim of a scam "yes" ! Isnt the capalist system supposed to crash the balloon to burst ! Why wont the world powers allow this to happen ? Maybe they are affraid that the balance of power may shift to the "east" !
Ponzi 's Scams are nothing new neither are recessions so whats the problem !
Leverage an 8 letter dirty word for "funny money" for the going ratio from 12 to 1 to 40 to 1 the new benchmark on wall street :shock: Well its been a hell of a party but like most parties somebody has to clean up the mess and with funny money times 40 the garbage trucks will be lineing the drive way for many years to come even when you think the mess has gone you only need look under the carpet :x

Hey they didnt hang tommy from a palm tree although i hear his bed is :mrgreen:
Look in life scams come our way every so often and the more rewarding they can be the more irresistible they become go ask the Nigerians

:mrgreen: :?:

 

[Markit]

Me I've got no sympathy for the those that were scammed by Madoff, as you said most of them probably got there's by scamming somebody else too and really should have known better - greed, pure and simple.

But I do have a lot of sympathy for the 1000s of poor or middle class or even rich Balinese that watched KKM develop over the last 3 years in all openness and then finally decided to take the plunge only to have its doors closed before their eyes.

10 years ago the same thing happened in Albania, nearly destroying the economy-they didn't understand capitalism. Then again in Russia, same reason, no experience of financing. All these examples happened in supposedly patriarchal states where, if not big brother, then at least, father state should have been looking out for its citizens - can't help believing that good old "father state" was earning on the deal too.

 

[troy]

At least one of Maddoffs largest investors was a fund ran for I believe (but could be wrong) the United Auto Workers Union. Whatever / whoever it was, many of the hedge funds invested with Maddoff were managing billions in peoples 401k's - normal people, because of laws in the US that relaxed the rules relating to how money in a 401k can be invested.

Don't think it's so black and white - many middle class lives have been ruined by Maddoff.

Troy F.

 

[mat]

Hey guys, what is your opinion of the village banks that offer 20% per annum on a years investment and 15% per annum [ 7.5%] on 6 months?
Are they safe? I keep some money in them because of the amazing interest, but I can't help worrying if it's safe, as the bigger banks only offer "normal" rates.
The banks I use have been around as long as most villagers can remember but, is this a case of being too good to be true?

 

[gilbert de jong]

Hi mat,

Do you mean with "village-banks" the koperasi-banks?

 

[mat]

Do you mean with "village-banks" the koperasi-banks?

Hi, Gilbert de Jong.
I don't know what a Koperasi Bank is, one of them I use is LPD. Desa Adat Dharmajati in Tukad Mungga. I think they been around about 10 years. The other is a similar bank in another village.

 

[Guest]

It's sad.

 

[Markit]

Don't know if the hefty 23% increase over last year in suicides on the island has anything to do with KKM but it would not surprise me.

The figures as listed in The Bali News Update:

Bali's northern district of Buleleng reported the greatest number of suicides in 2009 with 44 deaths (33%), followed by Karangasem with 25 (19%). Suicide deaths from other Bali districts in 2008 were Jembrana 14 (10%), Bangli 13 (10%), Gianyar 12 (9%), Denpasar 10 (7%), Tambanan 9 (7%), and Badung 5 (4%).

 

[mimpimanis]

Those figures were for 2008. Bali Discovery are reporting that suicides are actually down in 2009 compared to 2008 and police say the most common reason for suicide is illness and not being able to afford treatment.

http://www.balidiscovery.com/messages/message.asp?Id=5337