WinCapita
Encyclopedia
WinCapita, previously WinClub and GiiClub, was a Finnish Internet
-based pyramid scheme
, that advertised itself as a private investment club
engaged in currency trading. It is believed to have been the largest fraud in Finnish history. It operated mainly in Finland
, with a smaller number of members also in Sweden
. In March 2008, the company came under investigation by the National Bureau of Investigation
after allegations of operating a Ponzi scheme
and an aggravated fraud. The operation is believed to have been a bucket shop
type forex scam
. Chief suspect Hannu Kailajärvi reportedly admitted in a police investigation that the operation had been fraudulent, but later denied all charges in court. Some of the five suspects are believed to be at large in Thailand
.
The operation collected about 100 million euros from more than 10,000 investors, probably the largest fraud in the Finnish history.
A criminal trial against Kailajärvi and his female associate started in February 2011, with a verdict possibly due by the end of 2011. The prosecution is seeking a minimum sentence of five years in prison to Kailajärvi.
investment club that required an initial investment of several thousand euro
s while promising up to 4-fold returns. As a proof of concept for its members it offered an automatic "signal clock" software which was said to predict good times to buy or sell a currency. The main suspect later admitted during questioning that he had in fact once tried currency trading with a minor sum on his own account. The trade had resulted in a loss.
Members for the new club were acquired at presentation meetings, to which current members were encouraged to bring friends, who could then in turn be persuaded into investing in the club. The importance of respect and loyalty to the club were underlined in its rules.
The "investors' club" was especially popular on several web forums. The few lucky ones on the top of the pyramid who got initially paid told success stories to others, spreading trust to the club. According to intermediary police report over 10,000 people invested a total of almost 100 million euros in the club. However, only a small fraction of those have filed a police report so far. (About 2,250 as of June, 2009, for a sum of 33 million euros)
. It changed its name to WinCapita when a news channel
reported in 2007 that the police were investigating a pyramid scheme. The ongoing investigation had little effect on the club's membership, which continued to rise quickly. The club published reports to its members, where it claimed the media had made a mistake and the claims were out of line. The operations continued as WinCapita until 7 March 2008. On this day, the web site of the company went offline and the main suspect, Hannu Kailajärvi, consequently disappeared from the public.
Kailajärvi was arrested in early December 2008 in Nässjö
, Sweden
, where he had been hiding in a small cottage that had, according to the Swedish police, been acquired for him by a Sweden-residing person with a Finnish name. Kailajärvi is believed to have dwelled at least half a year in the cottage - he told his neighbours that he was renovating the house for a famous Finnish opera singer. Swedish police found three mobile phones in the cottage, and an Internet connection had been installed.
published an article about the wild-running conspiracy theories
surrounding WinCapita. Many people still believed that the club had been legitimate and that the police and the Ministry of the Interior were concealing evidence. It was stressed in the report that the main suspect Hannu Kailajärvi had already admitted in the questionings that the operation had been fraudulent.
.
In late October, 2009 another suspect was arrested in the WinCapita case, this time by the Thai police. He is said to have had a central role in the scheme. Warrant for his arrest was declared in absentia
, and an Interpol red notice
was simultaneously issued.
district court. The accused were charged with aggravated fraud
and a money collection offence. The prosecutor is seeking a minimum of five years in prison for Kailajärvi and forfeiting about six million euros to the state as criminal proceeds. Compensation to the victims will be tried in a separate case after the criminal trial has concluded, as will the criminal case against those up to 600 individuals that have been suspected of locally advancing the club.
A total of five people are suspected of involvement in the central organization of the scheme, but three of them are at large, and could face court proceedings later. The two charged indidivuals deny all charges, pleading that the proceeds were legally acquired as in any other business. The product that the company was selling was a "signaling system" that the members could use in their own currency trading. According to the defence the club did not involve itself in currency trading because the development of the automatic currency trading software had not finished.
Claims for damages in the court proceedings total to 37 million euros. The main trial is expected to last until autumn 2011, with a verdict possibly due by the end of the year.
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
-based pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
, that advertised itself as a private investment club
Investment club
An investment club is a group of individuals who meet on a regular basis for the purpose of pooling money and retail investing. The invested sums can be $30 to $100 per month. For certain type of club pooling money is not mandatory...
engaged in currency trading. It is believed to have been the largest fraud in Finnish history. It operated mainly in Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
, with a smaller number of members also in Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
. In March 2008, the company came under investigation by the National Bureau of Investigation
Keskusrikospoliisi
Keskusrikospoliisi located in the city of Vantaa is a division of Finland's national police. Literally Keskusrikospoliisi/Centralkriminalpolisen would be translated as "Central Criminal Police", which might be a more descriptive name for the entity, as its primary mission is to fight against...
after allegations of operating a Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
and an aggravated fraud. The operation is believed to have been a bucket shop
Bucket shop (stock market)
As defined by the U.S. Supreme Court a Bucket shop is "[a]n establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain,...
type forex scam
Forex scam
Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S...
. Chief suspect Hannu Kailajärvi reportedly admitted in a police investigation that the operation had been fraudulent, but later denied all charges in court. Some of the five suspects are believed to be at large in Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
.
The operation collected about 100 million euros from more than 10,000 investors, probably the largest fraud in the Finnish history.
A criminal trial against Kailajärvi and his female associate started in February 2011, with a verdict possibly due by the end of 2011. The prosecution is seeking a minimum sentence of five years in prison to Kailajärvi.
Scheme
The company presented itself as an invitation-only foreign exchangeForeign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
investment club that required an initial investment of several thousand euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
s while promising up to 4-fold returns. As a proof of concept for its members it offered an automatic "signal clock" software which was said to predict good times to buy or sell a currency. The main suspect later admitted during questioning that he had in fact once tried currency trading with a minor sum on his own account. The trade had resulted in a loss.
Members for the new club were acquired at presentation meetings, to which current members were encouraged to bring friends, who could then in turn be persuaded into investing in the club. The importance of respect and loyalty to the club were underlined in its rules.
The "investors' club" was especially popular on several web forums. The few lucky ones on the top of the pyramid who got initially paid told success stories to others, spreading trust to the club. According to intermediary police report over 10,000 people invested a total of almost 100 million euros in the club. However, only a small fraction of those have filed a police report so far. (About 2,250 as of June, 2009, for a sum of 33 million euros)
History
The investment company had been in operation since 2005 under the name "WinClub". The company was registered in PanamaPanama
Panama , officially the Republic of Panama , is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The...
. It changed its name to WinCapita when a news channel
MTV3
MTV3 is a Finnish commercial television station owned by Bonnier. It had the biggest audience share of all Finnish TV channels until Finnish Broadcasting Company’s YLE1 took the lead. The letters MTV stand for Mainos-TV , due to the channel getting its revenue from running commercials...
reported in 2007 that the police were investigating a pyramid scheme. The ongoing investigation had little effect on the club's membership, which continued to rise quickly. The club published reports to its members, where it claimed the media had made a mistake and the claims were out of line. The operations continued as WinCapita until 7 March 2008. On this day, the web site of the company went offline and the main suspect, Hannu Kailajärvi, consequently disappeared from the public.
Kailajärvi was arrested in early December 2008 in Nässjö
Nässjö
Nässjö is a locality and the seat of Nässjö Municipality, Jönköping County, Sweden with 16,463 inhabitants in 2005.-History:Nässjö was for a long time only a rural village with agriculture as the dominant occupation. The turning point was the construction of the Swedish railway system. The southern...
, Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
, where he had been hiding in a small cottage that had, according to the Swedish police, been acquired for him by a Sweden-residing person with a Finnish name. Kailajärvi is believed to have dwelled at least half a year in the cottage - he told his neighbours that he was renovating the house for a famous Finnish opera singer. Swedish police found three mobile phones in the cottage, and an Internet connection had been installed.
Blind faith
Even after Kailajärvi's disappearance, many club members still had faith in the club, forwarding reassuring emails to each other. In March 2009 the biggest Finnish newspaper Helsingin SanomatHelsingin Sanomat
Helsingin Sanomat is the largest subscription newspaper in Finland and the Nordic countries, owned by Sanoma. Except after certain holidays, it is published daily. In 2008, its daily circulation was 412,421 on weekdays and 468,505 on Sundays...
published an article about the wild-running conspiracy theories
Conspiracy theory
A conspiracy theory explains an event as being the result of an alleged plot by a covert group or organization or, more broadly, the idea that important political, social or economic events are the products of secret plots that are largely unknown to the general public.-Usage:The term "conspiracy...
surrounding WinCapita. Many people still believed that the club had been legitimate and that the police and the Ministry of the Interior were concealing evidence. It was stressed in the report that the main suspect Hannu Kailajärvi had already admitted in the questionings that the operation had been fraudulent.
Police investigation
In November, 2009, the investigation was ongoing, and the main suspect was held for trial in Finland. Another suspect, who is thought to have had a more minor role in the scheme, was also being held after being arrested at the airport when returning from ThailandThailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
.
In late October, 2009 another suspect was arrested in the WinCapita case, this time by the Thai police. He is said to have had a central role in the scheme. Warrant for his arrest was declared in absentia
In absentia
In absentia is Latin for "in the absence". In legal use, it usually means a trial at which the defendant is not physically present. The phrase is not ordinarily a mere observation, but suggests recognition of violation to a defendant's right to be present in court proceedings in a criminal trial.In...
, and an Interpol red notice
Red notice
An Interpol notice or international notice is issued by Interpol to share information between its members. There are seven types, six of which are known by their colour codes: Red, Blue, Green, Yellow, Black, Orange....
was simultaneously issued.
Trial
The trial against the head suspect Hannu Kailajärvi and his female associate began in February 2011 in the VantaaVantaa
Vantaa is a city and municipality in Finland. Helsinki, Vantaa, Espoo and Kauniainen make up the Helsinki Metropolitan Area.Vantaa, with its population of , is the fourth most populated city of Finland. The biggest airport in Finland, the Helsinki-Vantaa Airport, is located there...
district court. The accused were charged with aggravated fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
and a money collection offence. The prosecutor is seeking a minimum of five years in prison for Kailajärvi and forfeiting about six million euros to the state as criminal proceeds. Compensation to the victims will be tried in a separate case after the criminal trial has concluded, as will the criminal case against those up to 600 individuals that have been suspected of locally advancing the club.
A total of five people are suspected of involvement in the central organization of the scheme, but three of them are at large, and could face court proceedings later. The two charged indidivuals deny all charges, pleading that the proceeds were legally acquired as in any other business. The product that the company was selling was a "signaling system" that the members could use in their own currency trading. According to the defence the club did not involve itself in currency trading because the development of the automatic currency trading software had not finished.
Claims for damages in the court proceedings total to 37 million euros. The main trial is expected to last until autumn 2011, with a verdict possibly due by the end of the year.