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Baltic System Inc., the low-priced curry restaurant chain that failed in September, payed no dividends to investors who had banked more than ¥1 billion on the company’s advertised business expansion in China, lawyers for investors said Monday.

According to the lawyers, the case may constitute investment fraud. Although investors have won compensation suits filed against Baltic System or reached settlements with the company, compensation payments are in arrears, the lawyers said.

Baltic System could not be reached for comment.

According to investors, Baltic System solicited investors in 2006 and 2007 through Internet and magazine ads, in which the company said it was planning to open 600 curry shops in China over five years.

Baltic System then told applicants they would become joint shop owners with a minimum investment of ¥1 million that would be low-risk, high-return with a dividend estimated to grow 10 times larger after five years.

Although the first dividend payments were scheduled last year, no payments were made. Baltic System has not given any explanations to investors about the current state of the China project, the lawyers said.

In fact, Baltic System had solicited investment in a similar manner in 2003, when the company advertised plans to open curry shops at pachinko parlors nationwide, according to the lawyers.

At that time, dividend payments halted some time after the project started and Baltic System made no refunds after some investors made requests, they said.

The company may have been running business on a day-to-day basis, soliciting new investment just to pay dividends for its previous investors, the lawyers said.

Baltic System was registered in October 1998 as a corporate entity to operate a curry shop chain. At its peak, it had 45 outlets, according to a corporate credit research firm.

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