A pyramid scheme in Uzbekistan that reeled many high-profile celebrities into its net is now costing officials their job.
Since investigations began in mid-June, the fraud allegedly engineered by well-known businessman Ahmad Tursunbayev has caused enough ripples to knock dry political programing off the airwaves in favor of at least three television programs devoted to the case to date.
Among the officials to have lost their job are Behzod Mirsoatov, prosecutor for the Chinasky district of Tashkent out of which Tursunbayev operated. On July 25, the district head of police also got the chop and is now being questioned as a witness in the case. There are also unconfirmed reports that the head of the district is next for the metaphorical firing squad.
The removal of relatively important local officials signals a rare concession to restive public sentiment in Uzbekistan, although the story is actually a little less straightforward than that.
Tursunbayev’s suspected scam consisted simply of promising 100 percent yearly returns on investments made either in cash, gold or other assets, mainly cars. The bulk of his clients — estimated at between 40,000 and 80,000 people — appear to have been naive Uzbeks unused to market speculation.
Uzbekistan’s transition to a market-based economy has been negligible over the past 25 years and untrained investors are ripe subjects for fraudulent get-rich quick scams.
Against all odds, however, despite the unfolding scandal, Tursunbayev continues to enjoy some support from the public. Victims of his scheme have drowned prosecutors with letters — not to demand his punishment, but instead to ask that he be released, so that he might return their money and jewelry.
As best as anybody can tell, the hard cash amounts of 40 billion Uzbek sum ($13.6 million at the official exchange rate and $6.6 at the black market rate) and $12 million raked in by Tursunbayev is to be confiscated by the state, and regular citizens are not getting a look in.
One problem for prosecutors could theoretically be that Tursunbayev appears to have been careful not to provide any specific commitments to his customers in writing. In fact, the one note he did issue was to say that he could not guarantee return of investments in the event of his death or other unforeseen events, which presumably included his arrest. Still, Uzbek prosecutors are not exactly known to allow lack of documentary evidence get in the way of a conviction.
Tursunbayev’s fraudulent activities were allegedly carried out all across the country and appear by all accounts to have been given covert support by local officials, many of whom may now have to face the music as a result.
If some people are eager to see the case get wide attention, others are a little more cagey. Many of the dupes caught up in the pyramid scheme include popular singers, who one official with the prosecutor’s office familiar with the case told EurasiaNet.org are trying to hush up their losses for fear of having to explain the source of all their riches to the taxman. All the same, some details have trickled out. One singer known to have been stung to the tune of $400,000 is Ozodbek Nazarbekov, a favorite of President Islam Karimov.
This widely discussed scandal has highlighted some interesting weaknesses in Uzbekistan’s economy.
Authorities have been signally unable to create the conditions for personal financial investment. The country has no developed exchange market and people are wary of the banks. Lenders offer generous interest rates, but there is never any guarantee accountholders can actually get their hands on money when they need it. Many of those that manage to accumulate savings do so in dependable international currencies, but such are the restrictions on foreign cash transactions, that legal speculation with that money is in effect impossible. All those elements combine perfectly for unscrupulous businessman.
Indeed, as suggested above, although Tursunbayev is being insistently depicted on television as an irredeemable criminal, he is actually still held in high regard among many people for his donations to charities helping orphans, the disabled and the elderly. And despite everything, people that gave their money to Tursunbayev still harbor hopes of getting some or all of it back.
“I am waiting for Ahmadbai’s release, because I know perfectly well that they cannot keep him in jail. He owes a lot of money to a lot of people. Yes, it is true that he didn’t give any guarantees that he would return the money, but he has already returned a lot of assets and many have grown rich thanks to him,” one investor, Rasul from the Ferghana Valley town of Kokand, told EurasiaNet.org.
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