The growing middle class in ASEAN's biggest economy seen prone to being cheated .JAKARTA -- Indra Kesuma -- better known as Indra Kenz -- never seemed to run out of ideas for how to flaunt his newfound wealth, from parading luxury cars and expensive watches to showing off supposed new mansions and proposing to his girlfriend on a yacht. Kesuma's meteoric rags-to-riches tale captivated millions in Indonesia who followed his exploits on TikTok and YouTube.
The notoriety earned him the nicknames "Sultan of Medan" and "Crazy Rich Medan," the latter a reference to the popular 2018 film "Crazy Rich Asians" as well as the biggest city on Sumatra near where he grew up. His sudden rise, however, was followed by a stunning downfall. Police in February arrested the 26-year-old for involvement in an alleged scam and money laundering operation. Now, he is standing trial and potentially faces years behind bars if convicted.
He appeared at his first hearing via video link in a courtroom outside Jakarta on Friday with numerous journalists in attendance. Kesuma's arrest is just one of dozens that Indonesian police have made in recent months as they crack down on scams involving online trading and investment platforms. Such portals have surged in popularity in recent years in the largest economy in the Association of Southeast Asian Nations, owing to a growing middle class with an appetite for investing. More than 3,000 have been shut down as scams.
The coronavirus pandemic seems to have intensified the hunger for wealth. According to data from the Indonesian Central Securities Depository, there were 9.1 million retail investors in the country's capital markets as of June, more than triple the number in 2019.
To be sure, legitimate online platforms have contributed to the jump, but their shady counterparts also enjoyed a boost. Analysts say people stuck at home and glued to screens often end up enthralled by social media influencers like Kesuma showing off their riches and spewing trading tips, many misleading. That, combined with still generally low financial literacy, means many would-be investors are easy prey for cheats. "More and more people now understand the importance of investing," Media Wahyudi Askar, a digital economy expert at Indonesia's Gadjah Mada University, told Nikkei Asia. "But capital market literacy is still weak.
There are many rich people now, with better incomes and ... education, but they get scammed." Askar, who researches the topic, said most victims are younger than 40, social media savvy and usually "want to get rich quick." He also pointed out that low-income people with no access to financial institutions, part of Indonesia's still vast unbanked population, often fall victim to unscrupulous online peer-to-peer lending companies that are still flourishing despite being targeted in an earlier crackdown.
Heru Sutadi, executive director of information and communication technology-focused think tank Indonesia ICT Institute, noted many people get suckered because they don't understand new forms of digital investments. But "influencers flaunting their wealth and lavish trips" lure them in, he said. The centre of the fraud allegation against Kesuma is what is known as binary options trading, which he promoted. A binary option is a financial product that depends on the outcome of a "yes or no" proposition in which traders receive a payout if their binary option expires and yields a profit, or a "win." Experts consider it to be gambling.
Indonesian victims complained that they never won, alleging their money had gone directly into the wallets of owners of such platforms as well as "affiliates" -- those like Kesuma who promoted and recruited others to invest. "I was sceptical at first, but my social media feed kept showing commercials and content," 28-year-old Ahmad told Nikkei. He works in e-commerce and has invested in blue chip companies via stocks and mutual funds. "[I] must admit that I was greedy because I was curious about how to become rich fast," said Ahmad, who was willing to be identified only by his given name. In the end, he was somewhat lucky: He got out fast and lost less than $100.
Ahmad Ramadhan, an Indonesia National Police spokesman, told Nikkei last month that 144 people had filed reports against one particular platform associated with Kesuma, claiming an estimated 83.3 billion rupiah ($5.7 million) in losses. A special hotline on binary options scams is managed by the National Police Criminal Investigation Department's Economic and Special Crimes Directorate. Underscoring the murky nature of such scams, Ivan Yustiavandana, head of Indonesia's anti-money laundering agency PPATK said it traced 7.9 million euros ($8.2 million) allegedly funnelled from a bank account affiliated with the platform in Indonesia to one owned by a corporate entity in the Caribbean island nation of Saint Vincent and the Grenadines, which is believed to own the platform.
But he said the funds were again funnelled to an account in Seychelles believed to be owned by a Russian online gambling company. Overall in Indonesia, Yustiavandana said last month, 150 bank accounts at 56 financial service providers have been seized for a total of 361.2 billion rupiahs in relation to the platform over alleged money laundering. Ketut Sumedana, a spokesperson for the Attorney General's Office, which is conducting the prosecution, told Nikkei that multiple charges against Kesuma include money laundering via overseas transfer, which carries a maximum sentence of 20 years in prison and/or a fine of 10 billion rupiahs. He is also accused of conspiring to launder money, which carries a similar maximum sentence of 20 years in prison and/or a fine of 10 billion rupiahs.
Kesuma wrote in a letter dated June 9 and made available to local media by his lawyer that he never intended any harm, only wanting to "share [my] personal experience and expand my YouTube channel." He said he always reminded viewers of the risk of trading losses. "But whatever my intention was, I regret everything that has happened ... and extend my utmost apologies."
Kesuma's only comments at the Friday session were when the judge asked if he understood the charges, which he said he did. But Brian Praneda, the lawyer, told reporters outside court that prosecutors should be charging the platform operator instead of his client "because the victims made an agreement before they could do the trading" with the platform, not with Kesuma.
Prada added they also transferred their money to the platform's accounts, not Kesuma's. Police are also investigating cases against other platforms declared illegal in Indonesia in recent months by either the Indonesian Commodity Futures Trading Regulatory Agency (Bappebti), or the Financial Services Authority. Some have drawn in popular local celebrities, who said they knew nothing about them and were only paid to help with promotions.
But those could just be the tip of the iceberg, as Bappebti said it had blocked a total of 1,222 illegal websites, smartphone apps and social media accounts for commodity futures trading and "gambling disguised as trading" last year. Maru Nazara, a coordinator of a binary options victims advocacy group, told a TV interview in March that as many as 10,000 people across Indonesia have fallen victim to such scams. Some lost hundreds of millions, even billions, of rupiah, and ended up selling their cars or homes, Nazara said, with some people even taking their own lives. "[The alleged scammers] showed off their gains. But we didn't know those were fake," Nazara said. "Their gains ... came from our losses, not from trading. They're not traders, but they tricked the whole of Indonesia into thinking that they engaged in trading."
Source: https://asia.nikkei.com/Spotlight/Market-Spotlight/Indonesia-s-rising-appetite-for-online-investment-attracts-scams
