The Epic Downfall of Vietnam’s Real Estate Queen

A property tycoon has been sentenced to death. Guilty of embezzlement, bribery, violations of banking rules. This is Truong My Lan.

The 68-year-old Vietnamese businesswoman is the mastermind behind one of the biggest fraud cases the world has ever seen. Remember crypto entrepreneur Sam Bankman-Fried? Lan’s fraud is $4 billion bigger than his.

More than $12 billion. The case has sent shockwaves through Vietnam's business community and society. Lan has denied many of the charges and is appealing her death sentence.

So how was Lan able to embezzle all this money? And what does the case say about the path of Vietnam's economy as the country looks to attract foreign investors as an alternative destination to China? Truong My Lan’s sensational case is also a story of Vietnam's rise as one of Asia's fastest growing economies.

Truong My Lan's journey to riches began in the late 1980s inside the Ben Thanh Market. It's the main market in the commercial hub of Ho Chi Minh City. And these days, one of the city's top tourist destinations.

And it was here that Lan's family had a stall selling cosmetics and hair accessories. After the Vietnam War, the country reunified under communism but was financially ruined and isolated internationally. By the 1980s, Vietnam was in deep poverty, and it needed to reform by liberalizing and opening up to the rest of the world and following the footsteps of China.

It attracted foreign direct investment that wanted to leverage all its cheap labor costs. During this time, Lan's family saw an opportunity in property and started acquiring cheap land. Then in 1991, Lan founded Van Thinh Phat or VTP.

VTP rapidly became one of Vietnam's premium real estate companies. Over the years, VTP built up an impressive real estate portfolio, including office buildings, hotels and restaurants. But Lan's empire didn't stop there.

By 2011, she had become a well known businesswoman in Ho Chi Minh City and was the driving force behind the merger of three struggling banks into Saigon Commercial Bank, or SCB. Vietnamese law bans individuals from owning more than 5% of shares in a bank. But prosecutors say Lan ended up owning more than 90% of SCB.

According to the court judgment, Lan's VTP created a network of more than a thousand businesses, which they used to secure loan deals and register for collateral to withdraw money from Saigon Commercial Bank. Once loans were approved, they were either directly transferred to the bank accounts of the ghost companies, or were directly picked up in cash. All of this was unfolding during Vietnam's economic boom.

Through an export led model, Vietnam created one of the fastest growing economies in the region for two decades. The number of millionaires in Vietnam nearly doubled in the past decade, but the rapid accumulation of wealth also created challenges for the government. Alongside the economic revival, a culture of graft was also developed.

The anti-corruption campaign began more than a decade ago, but it was after the reelection of Nguyen Phu Trong as general secretary at the 12th Party Congress in 2016, that it really moved up a gear. The late Communist Party Chief likened the campaign to a blazing furnace, in that anyone linked to corruption, including government officials and business executives, would be engulfed in its heat. The crackdown has been widely portrayed as an attempt by Vietnam to bolster its appeal for foreign investment in the midst of the US-China trade war and to ensure the party's legitimacy.

One of the people caught in the campaign was Lan. Lan was arrested one evening in October 2022, initially on bond fraud charges. The detention had an immediate impact.

SCB customers rushed to withdraw their money and investors sold financial stocks. The state Bank of Vietnam spent a week calming markets. The court ruled SCB disbursed loans of around $43 billion to Lan and her allies.

That's equivalent to about 11% of Vietnam's GDP in 2022. In all, 86 defendants were tried in the case. They include Lan's husband, businessman Eric Chu, and her niece, who was chief executive officer of VTP.

All of the defendants were found guilty. This included 17 officials in charge of banking, inspection and supervision. They were accused of taking bribes to cover up SCB violations.

The crackdown has brought down two presidents, three deputy prime ministers, and seen hundreds of other government officials forced out or demoted. Truong My Lan is the highest profile case we've seen so far as part of this anti-corruption crackdown. What's not clear is how much further this campaign has to run.

But the campaign hasn't come without criticism. The investigative and legal process in Vietnam is usually not transparent. The US State Department says Vietnam's judiciary lacks independence, noting that the chief justice is also a member of the Politburo.

While the anti-corruption crackdown is intended to show the government's commitment to ensuring a sound business environment, critics say it's also been used to target political rivals. According to Vietnamese state media, late party leader Trong denied such claims and insisted the efforts were necessary. Trong defended the campaign as the tough medicine needed to promote Vietnam's long term stability.

But the departure of so many officials has had a significant impact on getting business done. One of the core criticisms of the corruption crackdown is the fact that it's just slowed down decision making and led to a form of bureaucratic paralysis, with officials being too scared to make a decision for fear of being the next ones to be caught. I've been in Vietnam for almost 33 years.

I've witnessed, I've been ery much part of an enormous amount of change in Vietnam. Now we have, I think, 18 different projects that we have either developed, completed or in our pipeline. The anti corruption campaign has definitely had an impact.

What used to take three months to get approval now takes 12 months, if not longer, and there are more approvals necessary. But it hasn't discouraged us from continuing to invest and move forward here. Ryder is not alone in his enthusiasm.

Despite recent political instability, Vietnam has continued to attract foreign investment at record rates. Even before geopolitical tensions have flared between the US and China, setting up tariff levels very high for production in China to be exporting to the US, Vietnam has been a favorite for investors for a China plus one story. Not only is it next to China, it also prioritizes sectors such as manufacturing, prioritizes policies that pull investment towards Vietnam.

You've got companies like Samsung and Apple pledging to boost investment in the country. Earlier this year, we saw Tim Cook in Hanoi meeting the prime minister as he looked to highlight the country and its role as an emerging global electronics hub. But as Vietnam's economic ambitions grow, so do the demands for greater transparency and a more robust regulatory framework.

While Vietnam's short term growth outlook is bright, challenges are looming, from demographic, to environmental, to geopolitics. And to deal with those challenges, Vietnam's political machine will need to be very nimble and productive. Otherwise, the challenges will be very, very difficult to overcome.

For now, Vietnamese all over the country are riveted by Lan’s stunning rise and fall, and what happens next for a woman who once seemed to embody Vietnam's economic success.