A defunct Okinawa-based health-food firm that allegedly engaged in a Ponzi scheme collected about 1.7 billion yen from investors even on the day it failed to pay dividends, sources said Thursday.
Zenkoku Hachiyo Butsuryu (Hachiyo) received the money from investors last Dec. 28, the sources said.
On Wednesday, police arrested 14 former Hachiyo officials for allegedly defrauding investors out of 70 million yen by promising them returns on their money within a certain period. Among those arrested was Osamu Tadokoro, 68, former honorary chairman.
Investigators suspect the officials continued to solicit money from investors even when they knew the firm was on the brink of failure.
Sources linked to regional Hachiyo branches said investors made a fuss on Dec. 28 because dividends, normally paid in the morning, were not paid on that day.
One branch received a call from the firm's regional headquarters in Tokyo on the same day directing it to put more effort into soliciting investments, because the firm was short 1.1 billion yen for paying dividends, the sources said.
"We did not usually receive that kind of order, so I felt it was strange," an executive at the local office said. "But I did not really think the firm would go under."
The Tokyo District Court declared Hachiyo bankrupt Jan. 29.
Hachiyo and its group companies allegedly persuaded investors, whom they called "agents," to purchase Hachiyo products for about 1.5 million yen per set. The companies claimed they would sell the goods on behalf of the agents and pay them 3 million yen in return a year later.
The company had allegedly collected 160 billion yen from 50,000 investors since 1999 under the illegal pyramid scheme, in which money from new investors is used to pay off earlier investors.
Hachiyo went bankrupt with 50 billion yen in debts to 40,000 investors, investigative sources said.